FSA Group Annual Report 2011

Plain-text annual report

FSA Group Limited Annual Report 2011 Steady growth FSA Group Limited ABN 98 093 855 791 Contents 2 Business Model 3 Services 4 Home Loans 5 Small Business 6 Financial Results 8 Chairman’s Letter 9 Executive Directors’ Review 13 Directors and Secretary 14 Financial Statements Australia’s largest provider of debt solutions Since 2000, FSA Group has helped thousands of Australians take control of their debt. Our large and experienced team of 179 professionals offer a range of debt solutions, which we tailor to suit individual circumstances and to achieve successful outcomes for our clients. Our vision is to expand our range of solutions, extending our services and introducing new products to meet the demand of our growing pool of clients. FSA GROUP LIMITED ANNUAL REPORT 2011 1 Steady growth delivered by leveraging a proven integrated business model in growth markets with high barriers to entry Proven integrated business model FSA Group has grown and evolved with the changing needs of our clients. We work closely with our clients and have added products and services in direct response to their evolving demands and needs. Our client base has grown through customised marketing and word of mouth. We support our clients through a sophisticated operating platform which allows us to process and support large volumes at low transaction cost and, it underpins and reinforces our risk management and compliance capabilities. Our relationship with our clients is of prime importance and it is based on the principles of fairness, transparency and honesty. Services FSA Group offers a range of simple and convenient services to assist clients wishing to enter into a payment arrangement with their creditors. These services include informal arrangements, debt agreements, personal insolvency agreements and bankruptcy. Home Loans FSA Group offers a range of simple and convenient products to assist clients with property wishing to consolidate their debt. FSA Group offers solutions both as a lender and manager of home loans. Small Business FSA Group offers a range of simple and convenient products and services to assist small businesses with cash ﬂ ow management. These solutions include consulting services and the provision of factoring ﬁ nance. Services Client Home Loans Small Business 2 FSA GROUP LIMITED ANNUAL REPORT 2011 Services The services market consists of individuals who rely upon a debt agreement or a personal insolvency agreement or bankruptcy to address their unmanageable debt. Debt agreements are an alternative to bankruptcy. They offer a simple way for an indebted individual to come to a payment arrangement with their creditors and yield superior returns to creditors when compared with bankruptcy. In July 2007 the Bankruptcy Act 1966 was amended, changing the way fees could be charged and collected. The result has been to further increase the barriers to entry into the market as debt agreement administrators require a substantial capital base to operate. 2011 Achievements: 53% market share for debt agreements 30% increase in clients administered under debt agreements $270m of unsecured debt managed under debt agreements The Market Consistent low level of arrears 40,000 35,000 30,000 25,000 20,000 15,000 10,000 5,000 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Bankruptcies Personal Insolvency Agreements Debt Agreements Source: Insolvency and Trustee Service Australia $63m paid to creditors under debt agreements One of the largest providers of personal insolvency agreements and bankruptcy FSA GROUP LIMITED ANNUAL REPORT 2011 3 Steady growth delivered through tailored solutions that assist more clients to achieve successful outcomes 2011 Achievements: One of the few remaining non-conforming home loan lenders Loan pool increased to $229m Consistent low level of arrears and capital losses Westpac facility increased to $260m and renewed to October 2013 Bendigo and Adelaide Bank approved a 3 year $50m facility Launched into the prime home loan market as a manager for Bendigo and Adelaide Bank Home Loans The non-conforming home loan market consists of lenders who provide loan products to an individual who is unlikely to conform to the lending criteria of the banks. Prior to the Global Financial Crisis, the market was characterised by a high number of competitors. Today fewer competitors remain with many exiting the market in 2008. Increased levels of capital are now required to operate a home loan lending business and this has increased the barriers to entry into the market. FSA Group is one of the few remaining non-conforming home loan lenders operating in the market. During the year FSA Group announced its launch into the prime home loan market as a home loan manager for Bendigo and Adelaide Bank. This move complements its existing non-conforming home loan lending activities. The Market Prime Home Loan Market $200b p.a. Non-Conforming Home Loan Market Estimated $2-4b p.a. Source: Datamonitor 4 FSA GROUP LIMITED ANNUAL REPORT 2011 2011 Achievements: Loan pool increased to $12m Consistent low level of arrears Nil Capital losses $25m Westpac facility renewed to July 2012 Good platform in place for future growth Small Business The factoring ﬁ nance market consists of lenders who assist small to medium businesses with cash ﬂ ow management by providing ﬁ nance primarily secured against the unpaid invoices of a business. There are only a few competitors operating in the market, many having been casualties of the Global Financial Crisis. Competition is likely to increase over the next few years, although the level of capital required to operate a factoring ﬁ nance business presents real barriers to entry. FSA Group offers a range of simple and convenient products and services to assist small businesses with cash ﬂ ow management. These solutions include consulting services and the provision of factoring ﬁ nance. The Market Factoring Finance Turnover $4 b p.a. Invoice Discounting Turnover $59b p.a. Source: Institute for Factors and Discounters FSA GROUP LIMITED ANNUAL REPORT 2011 5 Steady growth delivering strong, consistent and sustainable financial results Financial Results Revenue Net Assets 54.1 50.1 50.8 60 50 40 30 20 10 0 s n o i l l i m $ 36.3 33.6 21.8 14.2 54.6 44.8 32.1 22.6 18.9 11.9 60 50 40 30 20 10 s n o i l l i m $ 4.6 0 2005 2006 2007 2008 2009 2010 2011 2005 2006 2007 2008 2009 2010 2011 Profit After Tax (Attributable to Members) Basic Earnings Per Share 10 8 6 4 2 0 s n o i l l i m $ 8.8 9.0 7.5 6.5 2.5 2.7 1.2 10 s t n e c ¢ 8 6 4 2 0 6.24 7.66 6.51 5.82 2.85 2.37 1.38 2005 2006 2007 2008 2009 2010 2011 2005 2006 2007 2008 2009 2010 2011 6 FSA GROUP LIMITED ANNUAL REPORT 2011 …and building a range of solutions that support our clients throughout their entire financial lifecycle. Services Client Home Loans Small Business Today: Future: Insurance Savings & Investments Our vision is to expand our range of solutions, extending our services and introducing new products to meet the demand of our growing pool of clients FSA GROUP LIMITED ANNUAL REPORT 2011 7 Chairman’s Letter Dear Shareholders, The 2011 financial year has been a year of steady growth for FSA Group. FSA Group generated $54.1 million in revenue and achieved a record profit after tax attributable to members of $9.0 million, a 20% increase compared to the results of 2010. Our Services division, which offers debt agreements, personal insolvency agreements and bankruptcy as an option to indebted individuals, maintained its position as the market leader for debt agreements and increased its market share from 51% to 53% during 2011. We are also one of the largest providers of personal insolvency agreements and bankruptcy in the country. Our Home Loans division offers a range of simple and convenient products to assist clients with property wishing to consolidate their debt. FSA Group offers solutions both as a lender and manager of home loans. As a lender we have originated a high quality loan pool of over $229 million which is outperforming those of our competitors. Our non-recourse home loan funding facility was increased to $260 million and renewed for a further term by Westpac Banking Corporation. In addition Bendigo and Adelaide Bank approved a three year $50 million non-recourse home loan funding facility to supplement the Westpac facility. Our Small Business division provides a range of solutions to assist small businesses including consulting services and the provision of factoring finance. Through factoring finance, FSA Group has originated a high quality loan pool of over $12 million. Our $25 million limited- recourse factoring finance funding facility has been renewed until July 2012 by Westpac Banking Corporation. I am delighted to advise that the Directors have declared a maiden fully franked dividend of one cent per share for the 2011 financial year. I am confident of growth for FSA Group in the years ahead. I would like to thank my fellow Directors, all our executives and staff for their contribution to the successes of the current year. Yours sincerely, Sam Doumany, Chairman 8 FSA GROUP LIMITED ANNUAL REPORT 2011 Executive Directors’ Review Dear Shareholders, The 2011 ﬁ nancial year has been successful for FSA Group. During the year demand for our solutions underpinned revenues of $54.1 million (2010: $50.8 million) and helped to deliver a record proﬁ t after tax attributable to members of $9.0 million (2010: $7.5 million). The Directors have declared a maiden fully franked dividend of one cent per share for the 2011 ﬁ nancial year. Financial Overview Revenue and Income Proﬁ t Before Tax Proﬁ t After Tax (Attributable to Members) Net Assets NTA Backing/share EPS basic FY2010 $50.8m $12.9m $7.5m $44.8m 28.4c 5.82c FY2011 % Change $54.1m $15.3m $9.0m $54.6m 34.9c 6.51c ▲ 7% ▲ 19% ▲ 20% ▲ 22% ▲ 23% ▲ 12% During the 2011 ﬁ nancial year, FSA Group achieved a signiﬁ cant uplift in cash ﬂ ow from operations to $8.5 million driven by the increased number of clients administered under debt agreements. FSA Group expects client numbers will continue to grow during the 2012 ﬁ nancial year and the costs of administering these additional clients will be negligible. As a result FSA Group should continue to see a steady and sustained increase in cash ﬂ ow from operations. Cash Flow from operations Cash ﬂ ow from operations Clients administered under debt agreements FY2009 $1.1m 7,180 FY2010 $5.3m 11,050 FY2011 $8.5m 14,394 After year-end FSA Group secured additional funding and our existing funding facilities were increased and renewed. In August 2011, FSA Group announced its non-recourse home loan funding facility with Westpac Banking Corporation had been increased to $260 million and renewed to October 2013. In July 2011 FSA Group announced Bendigo and Adelaide Bank had approved a three year $50 million non-recourse home loan funding facility. This facility supplements the Westpac facility. Funding Facility Type Amount Renewal Date Westpac Banking Corporation Non-recourse home loan facility $260m October 2013 Bendigo & Adelaide Bank Non-recourse home loan facility Westpac Banking Corporation Limited-recourse factoring ﬁ nance facility $50m $25m June 2014 July 2012 Our business operates across the following key segments, Services, Home Loans and Small Business. We will now provide more detail around the operational performance of each division. FSA GROUP LIMITED ANNUAL REPORT 2011 9 Executive Directors’ Review cont. Operational Performance Services the Services division offers a range of simple and convenient solutions to assist clients wishing to enter into a payment arrangement with their creditors. these include informal arrangements, debt agreements, personal insolvency agreements and bankruptcy. FSA Group maintained its position as the market leader for debt agreements and increased its market share from 51% to 53% during 2011. We are also one of the largest providers of personal insolvency agreements and bankruptcy in the country. during 2011 there was a 30% increase in the number of clients administered under debt agreements and a 32% increase in the number of clients administered under personal insolvency agreements and bankruptcy. FSA Group’s arrears and risk management capabilities are a competitive advantage. our disciplined operating practices produced further productivity and efficiency gains in 2011. A testament to this is the dividends paid to creditors and a continued and sustained reduction in the level of arrears. FSA Group manages over $270 million of unsecured debt under debt agreements. during 2011 FSA Group paid $63 million in dividends to creditors. this was an increase of 13% compared to 2010. 10 FSA Group Limited AnnuAl RepoRt 2011 Dividend Distribution to Creditors 62.6 55.6 41.9 29.4 22.5 18.8 15.2 70 60 50 40 30 20 s n o i l l i m $ 10 10.2 0 2004 2005 2006 2007 2008 2009 2010 2011 What is a Debt Agreement? A debt agreement, which was introduced into the Bankruptcy Act in 1996, is a simple way for an indebted individual to come to a payment arrangement with their creditors. It is an alternative to going bankrupt and is a binding agreement between the individual and their creditors. Home Loans The Home Loans division offers a range of simple and convenient solutions to assist clients with property wishing to consolidate their debt. FSA Group offers solutions both as a lender and manager of home loans. The non-conforming home loan market consists of lenders who provide loan products to an individual who is unlikely to conform to the lending criteria of the banks. FSA Group has ﬁ rmly established a track record in non-conforming home loan lending. We have originated a high quality loan pool of over $229 million which is outperforming those of our competitors. Greater than 30 day arrears fell to 2.38% at June 2011 compared to 3.89% at June 2010. This compares with competitor arrears of 12.67% as reported by the Standard & Poor’s Index at May 2011. Demand for non-conforming home loan lending continues to rise due to fewer competitors and the stricter lending criteria imposed by the banks. During the year FSA Group announced its launch into the prime home loans market as a home loan manager for Bendigo and Adelaide Bank. This move complements its existing non-conforming home loan lending activities. Home Loan Lending Loan Pool Size Security Type Average Loan Size Average Weighted LVR Full Doc Borrowers Variable Rate Borrowers Geographical Spread > 30 day arrears* Loss of Capital since inception $229m 1st Mortgage $206,000 68% 98% 100% Australia Wide 2.38% $149,619 * Competitors > 30 day arrears as reported by Standard & Poor’s Index was 12.67% at May 2011. FSA GROUP LIMITED ANNUAL REPORT 2011 11 Executive Directors’ Review cont. Small Business The Small Business division offer a range of simple and convenient solutions to assist small businesses with cash ﬂ ow management. These solutions include consulting services and the provision of factoring ﬁ nance. FSA Group has ﬁ rmly established a track record in factoring ﬁ nance. We have originated a high quality loan pool of over $12 million. FSA Group is experiencing demand for factoring ﬁ nance because the availability of credit for small businesses continues to remain tight. Factoring Finance Loan Pool Size Security Type Average Loan Size Average Weighted LVR Variable Rate Borrowers Geographical Spread > 90 day arrears Asset insured Loss of Capital since inception Strategy and Outlook $12m Assigned Receivables $225,000 Ranges 55%–65% 100% Australia Wide 9.30% Yes Nil High levels of consumer debt should continue to drive demand for our products and services. Home loan lending and factoring ﬁ nance have positioned FSA Group to assist more clients and secure annuity income. We will continue to source additional funding capacity to support the growth of high quality loan pools and to achieve our long term targets. Our longer term vision is to build a range of accessible solutions that support our clients throughout their entire ﬁ nancial lifecycle. To achieve this we will continue to invest in expanding FSA Group’s products and services. We believe this will enable us to both leverage our existing client base and grow the pool of clients we can assist going forward. Our People FSA Group employs 179 people. We would like to acknowledge the efforts of all our team during what has been a very busy period. We would also like to thank our Board for their guidance and support during the year. Yours sincerely, Tim Odillo Maher Executive Director Deborah Southon Executive Director 12 FSA GROUP LIMITED ANNUAL REPORT 2011 Directors and Secretary (Above from left) Tim Odillo Maher, Don Mackenzie (Secretary), Sam Doumany, Sally Herman, Deborah Southon and Stan Kalinko FSA GROUP LIMITED ANNUAL REPORT 2011 13 Financial Statements 15 25 26 34 35 36 37 38 71 72 74 76 Directors’ Report Auditor’s Independence Declaration Corporate Governance Statement Statement of Comprehensive Income Statement of Financial Position Statement of Changes in Equity Statement of Cash Flows Notes to the Financial Statements Directors’ Declaration Independent Auditor’s Report Shareholder Information Corporate Information 14 FSA GROUP LIMITED ANNUAL REPORT 2011 Directors’ Report for the year ended 30 June 2011 Directors Special responsibilities The Directors of the Company at any time during or since the end of the ﬁ nancial year are: Member of the Audit & Risk Management Committee and Remuneration Committee. Sam Doumany Tim Odillo Maher Deborah Southon Stan Kalinko Sally Herman (appointed 24 January 2011) Hugh Parsons (resigned 31 May 2011) Sam Doumany (Non-Executive Chairman) Experience and Expertise Mr Doumany was appointed as a Non-Executive Director on 18 December 2002 and was appointed Chairman on 30 June 2003. Mr Doumany commenced his career in economic research, agribusiness and marketing before embarking on a distinguished political career as a member of parliament in Queensland in 1974. Between 1974 and 1983 Mr Doumany served on several parliamentary committees, the Liberal Party’s State and Federal Rural Policy Committees and the Queensland Liberal Party State Executive. Elevated to the Cabinet in 1978, Mr Doumany served ﬁ rstly as Minister for Welfare and Corrective Services before serving as Minister for Justice, Queensland Attorney-General and the Deputy Leader of the Liberal Parliamentary Party until late 1983. Throughout his parliamentary and ministerial career Mr Doumany worked closely, at a senior level, with a wide range of key professional, industry and community organisations. Since 1983 Mr Doumany has operated a consultancy practice providing services in government relations, corporate strategy and market development. Mr Doumany was also retained by Ernst & Young in an executive consultancy role between 1991 and 2002. Signiﬁ cant assignments for Ernst & Young include the Coutts and Bartlett Receiverships as well as major submissions to the Federal Government. He has also held numerous executive and Non-Executive board positions, many as Chairman, for private and public companies, industry authorities/associations and review committees. Mr Doumany holds a Bachelor of Science (Agriculture) from the University of Sydney and is a member of the Australian Institute of Company Directors. Other current (listed company) directorships Nil Former (listed company) directorships in last 3 years Lindsay Australia Limited (resigned 17 November 2010) Interest in shares and options Ordinary shares 1,040,541 Tim Odillo Maher (Executive Director) Experience and Expertise Mr Odillo Maher was appointed on 30 July 2002. Mr Odillo Maher’s background has been in banking and ﬁ nance, before concentrating on insolvency and corporate ﬁ nance assignments. He has worked at ANZ Banking Corporation and Star Dean Wilcocks Chartered Accountants. Mr Odillo Maher holds a Bachelor of Business Degree (majoring in Accounting and Finance) from Australian Catholic University and is a Certiﬁ ed Practising Accountant. His work experience has included special reviews of companies experiencing ﬁ nancial difﬁ culties, the rationalisation and re-organisation of businesses, and the implementation of turnaround and exit strategies for businesses, including support plans and asset disposal programmes. Other current (listed company) directorships Nil Former (listed company) directorships in last 3 years Nil Special responsibilities Nil Interest in shares and options Ordinary shares 42,809,231 Deborah Southon (Executive Director) Experience and Expertise Ms Southon was appointed on 30 July 2002. Ms Southon has attained a wealth of experience in the government and community services sectors having worked for the Commonwealth Department of Health and Family Services, the former Department of Community Services, and the Smith Family. Ms Southon has successfully managed a programme and administration budget exceeding $150 million and was part of a management team which oversaw a signiﬁ cant growth in client numbers and service delivery which stemmed from the implementation of fresh legislation. Ms Southon has an Executive Certiﬁ cate in Leadership & Management (University of Technology, Sydney) and a Bachelor of Arts Degree (Sydney University). FSA GROUP LIMITED ANNUAL REPORT 2011 15 Directors’ Report cont. for the year ended 30 June 2011 Other current (listed company) directorships Interest in shares and options Nil Ordinary shares 15,406 Former (listed company) directorships in last 3 years Sally Herman (Non-Executive Director) Nil Special responsibilities Nil Interest in shares and options Ordinary shares 12,960,047 Stan Kalinko (Non-Executive Director) Experience and Expertise Mr Kalinko was appointed on 9 May 2007. Mr Kalinko commenced his career in South Africa and spent 20 years as a practising solicitor. In late 1983, he migrated to Australia and spent one year as an associate at Stephen Jaques Stone James, now Mallesons Stephen Jaques. Between 1985 and 1989 he worked as a merchant banker for Kleinwort Benson Australia (“KBA”), a subsidiary of the largest merchant bank in the United Kingdom at the time, until KBA was sold to Security Paciﬁ c Ltd. Mr Kalinko continued to work there until 1991. For 16 years prior to joining the Board of FSA Group, Mr Kalinko was a partner at Deacons, (now Norton Rose) a national and international law ﬁ rm. He specialised primarily in corporate and commercial law, focussing on mergers and acquisitions, management buy-outs and joint ventures, and advising company directors and underwriters on capital raisings. He spent eight years on the board of Deacons in Sydney, three years on their national board, 10 years as the business unit leader of their Banking and Finance Practice Group and three years as Chairman of the Sydney ofﬁ ce. Mr Kalinko retired from Deacons on 30 June 2007. Mr Kalinko is a Fellow of the Australian Institute of Company Directors and has a Bachelor of Commerce, a Bachelor of Laws and a Higher Diploma in Tax. He is also an accredited mediator. Other current (listed company) directorships Nil Former (listed company) directorships in last 3 years Nil Special responsibilities Member of the Audit & Risk Management Committee and Remuneration Committee Experience and Expertise Ms Herman was appointed on 24 January 2011. Ms Herman has more than 25 years’ executive experience in ﬁ nancial services in both Australia and in the United States, and has spent the last 16 years with the Westpac Group running major business units in almost every operating division of the Group. She also has broad board experience in the Not For Proﬁ t Sector, currently sitting on several boards including Urbis Pty Ltd, Endeavour Foundation and the State Library of NSW Foundation. She is also a graduate of the Australian Institute of Company Directors and holds a Bachelor of Arts degree. Prior to Westpac, Ms Herman held a senior role at Macquarie Bank and has worked for Australian and international ﬁ nancial services ﬁ rms during her career. Ms Herman retired as an executive of Westpac in September 2010. Other current (listed company) directorships Nil Former (listed company) directorships in last 3 years Nil Special responsibilities Member of the Audit & Risk Management Committee and Remuneration Committee Interest in shares and options Ordinary shares Company Secretary Nil Mr Don Mackenzie was appointed to the position of Company Secretary on 19 November 2010. He is a Chartered Accountant and has had experience working with Chartered Accounting ﬁ rms and has held senior positions with public companies involved in the rural and manufacturing industries. Since 1993 he has provided corporate support services to public companies predominately involved in manufacturing, mining, information technology and rural operations. Mr Mackenzie is a Non-Executive Director of Forest Place Group Limited (since March 2004), an alternate Director of Silver Chef Limited (since March 2005) and was previously a Director of Occupational and Medical Innovations Limited (November 2004 to 29 March 2010). He is also the Secretary to all Board committees. 16 FSA GROUP LIMITED ANNUAL REPORT 2011 Directors’ Report cont. for the year ended 30 June 2011 Former Company Secretaries Liquidity and funding Mr Duncan Cornish and Mr Anthony Carius were joint secretaries of the Company until their resignations on 19 November 2010. Principal activities The Consolidated Entity has sufﬁ cient funds to ﬁ nance its operations, and also to allow the Consolidated Entity to take advantage of favourable business opportunities, not speciﬁ cally budgeted for, or to fund unforeseen expenditure. The principal activities of the Consolidated Entity during the year were providing debt solutions and direct lending services to individuals and businesses. Signiﬁ cant changes in the state of affairs There were no signiﬁ cant changes in the state of affairs of the Consolidated Entity in the ﬁ nancial year. Operating results After reporting date events The consolidated proﬁ t from ordinary activities for the Consolidated Entity after providing for income tax and eliminating Non-Controlling interests was $8,995,715 (2010: $7,520,564). Dividends paid or recommended There were no dividends paid or recommended to be paid during the ﬁ nancial year. Review of operations Detailed comments on operations are included separately in the Annual Report in the Executive Directors’ review. Review of ﬁ nancial condition Capital structure There have been no changes to the Company’s capital structure during or since the end of the ﬁ nancial year except as follows: (cid:129) On 2 July 2010, 1,050,000 options exercisable at $0.50 on or before 2 July 2013 were issued as part of Executive remuneration. Financial position The net assets of the Consolidated Entity have increased from $44,749,490 at 30 June 2010 to $54,564,463 at 30 June 2011. The Consolidated Entity’s working capital, being current assets less current liabilities has improved from $22,875,268 in 2010 to $33,340,303 in 2011. Treasury policy The Consolidated Entity does not have a formally established treasury function. The Board is responsible for managing the Consolidated Entity’s currency risks and ﬁ nance facilities. The Consolidated Entity does not currently undertake hedging of any kind. There have been no events since the end of the ﬁ nancial year that impact upon the ﬁ nancial statements as at 30 June 2011 except as follows: (cid:129) On 4 July 2011, the Company obtained a three year non-recourse $50m note facility from Bendigo and Adelaide Bank. (cid:129) On 25 August 2011, the Company signed an extension of its existing non-recourse note facility, increasing its $235m facility limit to $260m for a further term with the facility now expiring on 15 October 2013. (cid:129) On 30 August 2011, Directors declared a maiden one cent fully franked dividend to shareholders to be paid on 30 September 2011 with a record date of 13 September 2011. Future developments Likely developments in the operations of the Consolidated Entity and the expected results of those operations in subsequent ﬁ nancial years have been discussed where appropriate in the Annual Report in the Executive Directors’ review. There are no further developments that the Directors are aware of which could be expected to affect the results of the Consolidated Entity’s operations in subsequent ﬁ nancial years other than the information contained in the Executive Directors’ review and besides any other information which the Directors believe comment on or disclosure of would prejudice the interests of the Consolidated Entity. Environmental issues There are no matters that have arisen in relation to environmental issues up to the date of this report. Share options As at 30 June 2011 there were 1,050,000 (2010: Nil) unissued ordinary shares under options. FSA GROUP LIMITED ANNUAL REPORT 2011 17 Directors’ Report cont. for the year ended 30 June 2011 Indemniﬁ cation and insurance of directors and ofﬁ cers Each of the Directors and the Ofﬁ cers of the Company have entered a Deed with the Company whereby the Company has provided certain contractual rights of access to books and records of the Company to those Directors and Ofﬁ cers; and indemniﬁ es those Directors and Ofﬁ cers against liabilities suffered in the discharge of their duties as Directors or Ofﬁ cers of the Company. The Company has also insured all of the Directors and Ofﬁ cers of FSA Group Ltd. The contract of insurance prohibits the disclosure of the nature of the liabilities covered and amount of the premium paid. The Corporations Act 2001 does not require disclosure of the information in these circumstances. Remuneration Report (Audited) This report outlines the remuneration arrangements in place for Directors and Executives of FSA Group Ltd (the Company). Remuneration policy The performance of the Company depends upon the quality of its Directors, Executives and Senior Management. To prosper, the Company must attract, motivate and retain highly skilled Directors, Executives and Senior Management. The Board has introduced a Remuneration Committee but does not have a Nomination Committee. The Directors consider that the Company is not of a size, nor are its affairs of such complexity, as to justify the formation of a Nominations Committee. All matters which might be dealt with by that committee are reviewed by the Directors in meeting as a Board. The Remuneration Committee is responsible for determining and reviewing compensation arrangements for the Directors, Executives and Senior Management. The Remuneration Committee assesses the appropriateness of the nature and amount of emoluments of such ofﬁ cers on a periodic basis by reference to relevant employment market conditions with the overall objective of ensuring maximum shareholder beneﬁ t from the retention of a high quality board and Executive team. Such ofﬁ cers are given the opportunity to receive their base emolument in a variety of forms including cash and fringe beneﬁ ts. It is intended that the manner of payments chosen will be optimal for the recipient without creating undue cost for the Company. The Company aims to reward the Directors, Executives and Senior Management with a level and mix of remuneration commensurate with their position and responsibilities within the Company. The Board’s policy is to align Director, Executive and Senior Management objectives with shareholder and business objectives by providing a ﬁ xed remuneration component and offering short and long-term incentives. In accordance with best practice corporate governance, the structure of Non-Executive Director, Executive Director, Executive and Senior Management remuneration is separate and distinct. Non-Executive Director Remuneration The Board seeks to set aggregate remuneration at a level which provides the Company with the ability to attract and retain directors of the highest calibre, whilst incurring a cost which is acceptable to shareholders. The Constitution of the Company and the ASX Listing Rules specify that the Non-Executive Directors are entitled to remuneration as determined by the Company in General Meeting. The total aggregate annual remuneration payable to Non-Executive Directors of the Company was determined at the Annual General Meeting held on 18 November 2010 at $500,000 (and where applicable, excludes the value of share options expensed as calculated by the Black-Scholes method). If a Non-Executive Director performs extra services, which in the opinion of the Directors are outside the scope of the ordinary duties of the Director, the Company may remunerate that Director by payment of a ﬁ xed sum determined by the Directors in addition to or instead of the remuneration referred to above. A Non-Executive Director is entitled to be paid travel and other expenses properly incurred by them in attending Directors’ or General Meetings of the Company or otherwise in connection with the business of the Company. The remuneration of Non-Executive Directors for the year ending 30 June 2011 is detailed in Table 1 of this Remuneration Report. Executive Directors and Senior Management Remuneration The Company aims to reward the Executive Directors and Senior Management with a level and mix of remuneration commensurate with their position and responsibilities within the Company and so as to: (cid:129) reward Executives for company and individual performance against targets set by reference to appropriate benchmarks; (cid:129) align the interests of Executives with those of shareholders; (cid:129) link reward with the strategic goals and performance of the Company; and (cid:129) ensure total remuneration is competitive by market standards. 18 FSA GROUP LIMITED ANNUAL REPORT 2011 Directors’ Report cont. for the year ended 30 June 2011 The remuneration of the Executive Directors and Senior Management may from time to time be ﬁ xed by the Board. The remuneration will comprise a ﬁ xed remuneration component and also may include offering speciﬁ c short and long-term incentives, in the form of: 1. performance based salary increases and/or bonuses; and/or 2. share-based payments. Performance based salary increases and bonuses are assessed on a discretionary basis by the Board. No formal performance conditions or earnings milestones have been set for the granting of salary increases and bonuses. This allows the Board to retain ﬂ exibility around granting of salary increases and bonuses if the Company is affected by adverse economic conditions, and the payment of these salary increases and bonuses is not in the best interests of shareholders. A review of bonuses paid to the Executive Directors over the previous ﬁ ve years is consistent with the operational performance of the Group in those periods. All executives and employees have the opportunity to qualify for participation in the FSA Group Ltd Employee Share Option Plan (“ESOP”). The remuneration of the Executive Directors and Senior Management for the year ended 30 June 2011 is detailed in Table 1 of this Remuneration Report. An employee share incentive scheme has been established where executives and certain members of staff of FSA Group Ltd are issued with options over the ordinary shares of FSA Group Ltd. The options, issued for nil consideration, are issued in accordance with performance guidelines established by the Directors of FSA Group Ltd. The options cannot be transferred and will not be quoted on the ASX. The total number of shares in respect of which options may be granted under the scheme to employees and which have not been exercised or lapsed shall not at any time exceed ﬁ ve percent (5%) of the Company’s total issued share capital. There are no such restrictions as to the number of shares in respect of which options may be granted under the scheme to executives. The exercise price of an option and the exercise period is determined by the Board in accordance with Listing Rules. A Securities Trading Policy has been adopted for employees’ and directors’ dealings in the Company’s securities. Employment contracts It is the Board’s policy that employment agreements are entered into with all Executive Directors, Executives and employees. Employment contracts are for no speciﬁ c ﬁ xed term unless otherwise stated. Executive Directors The Executive Directors, Mr Tim Odillo Maher and Ms Deborah Southon are employed under Executive Service Contracts. Under the terms of the contracts: (cid:129) Both FSA Group Ltd and the Executive Directors are entitled to terminate the contract upon giving three months written notice. (cid:129) FSA Group Ltd is entitled to terminate the agreements upon the happening of various events or other conduct or if Mr Odillo Maher or Ms Southon cease to be Directors of FSA Group Ltd. (cid:129) The contracts provide for annual reviews of performance by FSA Group Ltd. (cid:129) There are no early termination clauses. Non-Executive Directors Mr Hugh Parsons Until his resignation on 31 May 2011, Mr Hugh Parsons had been engaged under an Employment Agreement and a Letter of Appointment of Non-Executive Director. Upon his resignation, the terms of both arrangements ceased and details of his remuneration for the period are included in (b) Remuneration of Directors and Key Management Personnel. Senior Management Employment contracts entered into with senior management contain the following key terms: Event Performance based salary increases and/or bonuses Short and long-term incentives, such as options and shares Resignation/notice period Serious misconduct Payouts upon resignation or termination, outside industrial regulations (i.e. ‘golden handshakes’) Company Policy Board discretion Board discretion One to three months Company may terminate at any time Board discretion FSA GROUP LIMITED ANNUAL REPORT 2011 19 Directors’ Report cont. for the year ended 30 June 2011 (a) Details of Directors and Key Management Personnel (i) Directors Sam Doumany Tim Odillo Maher Deborah Southon Stan Kalinko Sally Herman Hugh Parsons Non-Executive Chairman Executive Director Executive Director Non-Executive Director Non-Executive Director (appointed 24 January 2011) Non-Executive Director (resigned 31 May 2011) (ii) Key Management Personnel Don Mackenzie Anthony Carius Fred El Tahche Goran Turner David Camilleri Company Secretary (appointed 19 November 2010) Chief Financial Ofﬁ cer (resigned 1 July 2011)* Chief Information Ofﬁ cer Chief Executive – Fox Symes Home Loans Manager – Debt Agreements * Anthony Carius resigned as CFO with effect from 1 July 2011. He will remain with the Company until 31 August 2011 to ensure a smooth transition to the Company’s new CFO Ms Cellina Chen who has been the Company’s Financial Controller since December 2003. (b) Remuneration of Directors and Key Management Personnel The Key Management Personnel of the Group include Don Mackenzie, Anthony Carius and Fred El Tahche, being the only executive ofﬁ cers of the Group’s parent company, FSA Group Ltd. Short-term Long-term Employment Termination Post- Performance based Total Salary & Fees $ Cash Bonus $ Non-cash beneﬁ ts $ Non-cash beneﬁ ts $ Super- annuation $ 98,142 88,879 – – 258,875 218,000 54,500 125,000 – – – – 4,708 2,946 8,833 7,999 – – – – 241,154 209,230 50,000 123,462 11,638 3,846 28,781 5,247 19,699 14,461 59,258 48,307 25,294 – 65,711 57,937 – – – – – – – – – – – – – – – – – – 5,333 6,187 2,277 – $ – – – – – – – – – – $ 111,683 99,824 313,375 343,000 351,272 356,246 64,591 54,494 27,571 – % – – 17% 36% 14% 35% – – – – – – 10,539 12,299 51,389 – 127,639 70,236 Table 1 Directors Sam Doumany 2011 2010 Tim Odillo Maher 2011 2010 Deborah Southon 2011 2010 Stan Kalinko 2011 2010 Sally Herman 2011 2010 Hugh Parsons 2011 2010 Total Remuneration 2011 2010 748,434 622,353 104,500 248,462 11,638 3,846 33,489 8,193 46,681 40,946 51,389 – 996,131 923,800 Executive Director bonuses inclusive of statutory payroll entitlements (representing 100% of the total bonuses to be paid) were paid on 23 August 2010 and were approved by the Board. The Executive Directors abstained from the vote. 20 FSA GROUP LIMITED ANNUAL REPORT 2011 Directors’ Report cont. for the year ended 30 June 2011 Short-term Long-term Employment Post- Share-based Payment Performance based Total Salary & Fees $ Cash Bonus $ Non-cash beneﬁ ts $ Non-cash beneﬁ ts $ Super- annuation $ Key Management Personnel Don Mackenzie 2011 28,000 – – 183,608 172,815 *35,000 – 13,399 13,824 17,787 14,292 55,000 7,647 304,794 208,578 182,000 182,000 **25,000 ^30,000 1,298 12,839 2,991 – 20,549 17,161 26,457 – 258,295 242,000 – – – $ – $ 28,000 – – – – 434,138 268,168 218,321 40,000 % – 12% – 10% 12% 35% – – – – – 253,798 ^^150,000 – 246,140 5,312 4,028 7,028 – 18,000 18,000 195,476 – 1,869 3,384 17,592 Anthony Carius 2011 2010 Fred El Tahche 2011 2010 Goran Turner 2011 2010 David Camilleri 2011 Previously designated as Key Management Personnel Duncan Cornish 2010 40,000 – – Nino Eid 2010 149,368 – – – – 13,443 2,832 165,643 33% Total Remuneration 2011 2010 842,882 790,323 210,000 30,000 21,878 30,691 13,403 – 73,928 62,896 81,457 1,243,548 924,389 10,479 * Bonus (representing 100% of the total bonus to be paid) was paid on 9 November 2010. The bonus was approved by the Board as part of discretionary performance based remuneration. ** Bonus (representing 100% of the total bonus to be paid) was paid on 26 October 2010. The bonus was approved by the Board as part of discretionary performance based remuneration. ^ Bonus (representing 100% of the total bonus to be paid) was paid on 11 November 2009. The bonus was approved by the Board as part of discretionary performance based remuneration. ^^ Bonus (representing 100% of the total bonus to be paid) was paid on 23 August 2010. The bonus was approved by the Board as part of discretionary performance based remuneration. Fair value of options granted as part of remuneration are estimates only. The estimates are based on the use of the Black-Scholes option pricing model. This model takes account of factors such as the option exercise price, the current level and volatility of the underlying share price and the time to maturity of the options. Option % of total remuneration 2010 2011 Option % of total remuneration 2010 2011 Directors Nil Nil Nil Key Management Personnel Anthony Carius Fred El-Tahche 18% 10% 4% Nil Consolidated Entity’s earnings and movement in shareholders wealth for the last ﬁ ve years is as follows: 30 June 2011 30 June 2010 30 June 2009 30 June 2008 30 June 2007 Revenue and Income (Net) $54,139,504 $50,780,366 $50,073,622 $36,288,711 $33,655,696 Net proﬁ t before tax Net proﬁ t after tax Share price at the start of the year Share price at the end of the year Basic EPS (cents) Diluted EPS (cents) $15,328,466 $12,868,122 $13,939,337 $4,737,736 $9,695,906 $11,015,591 $9,177,212 $10,021,632 $3,203,924 $6,821,586 $0.36 $0.24 6.51 6.51 $0.38 $0.36 5.82 5.82 $0.16 $0.38 7.66 7.15 $0.88 $0.16 2.37 2.21 $0.24 $0.88 6.24 5.76 A review of discretionary performance bonuses over the previous ﬁ ve years is consistent with growth in Basic and Diluted Earnings per Share. Salaries and Fees, as determined by the Board are consistent with the levels required to attract and retain Directors and Key Management Personnel in companies of a comparable size. FSA GROUP LIMITED ANNUAL REPORT 2011 21 Directors’ Report cont. for the year ended 30 June 2011 (c) Options issued as part of remuneration for the year ended 30 June 2011 On 2 July 2010, 1,050,000 options exercisable at $0.50 on or before 2 July 2013 were issued as part of executive remuneration. (d) Shares issued on exercise of remuneration options There were no shares issued on the exercise of remuneration options during or since the end of the ﬁ nancial year. (e) Option holdings of Directors and Key Management Personnel Granted as Balance at Granted as 1 July 2010 remuneration Exercised Options Net Change Other 30 June 2011 Vested at Balance at 30 June remuneration/ Balance at the date of this report (lapsed) 2011 after year end ESOP Options Directors Key Management Personnel Anthony Carius Fred El Tahche Total ESOP Options n/a – – – 550,000 500,000 1,050,000 – – – – – – 550,000 125,000 500,000 100,000 1,050,000 225,000 – – – 550,000 500,000 1,050,000 All options due to vest to Directors or other employees under their respective option agreements, will vest if they are employed with the Group at vesting date. The exercise price reﬂ ects the closing share price of FSA Group Ltd on the trading day preceding the grant plus a premium speciﬁ c to each grant contract to ensure beneﬁ ts are linked to the future growth in share price of the Company. The terms and conditions of each grant of options affecting remuneration in the previous, this or future reporting periods are as follows: Terms & Conditions for Each Grant Grant Date 02-Jul-2010 02-Jul-2010 02-Jul-2010 Grant Number 225,000 275,000 550,000 Vest Date 30-Apr-2011 30-Apr-2012 30-Apr-2013 Fair Value per option at grant date ($) $0.1000 $0.1000 $0.1000 Exercise Price $0.500 $0.500 $0.500 Expected Volatility 52.96% 52.96% 52.96% Dividend Yield Risk-free rate 0.00% 0.00% 0.00% 4.69% 4.69% 4.69% Inputs into the Black-Scholes option pricing model were determined by independent external advisors and were based on the historical performance of the underlying equities under option. There were no vesting conditions associated with these options other than the continued employment of the Individual at vesting date. (f) Shareholdings of Directors and Key Management Personnel Shares held in FSA Group Ltd Balance Granted as 1 July 2010 Remuneration Options Exercised Net Change Balance Other 30 June 2011 Directors Sam Doumany Tim Odillo Maher Deborah Southon Stan Kalinko Sally Herman Key Management Personnel Anthony Carius David Camilleri Total 1,040,541 48,809,231 12,960,047 15,406 – 66,699 77,000 62,968,924 – – – – – – – – – – – – – – – – – 1,040,541 (6,000,000) 42,809,231 – – – 1,500 – 12,960,047 15,406 – 68,199 77,000 (5,998,500) 56,970,424 22 FSA GROUP LIMITED ANNUAL REPORT 2011 Directors’ Report cont. for the year ended 30 June 2011 Directors’ Meetings The number of meetings of Directors held during the year and the number of meetings attended by each Director are as follows: Sam Doumany Tim Odillo Maher Deborah Southon Hugh Parsons Stan Kalinko Sally Herman Number of meetings held while in ofﬁ ce 13 13 13 11 13 6 Meetings attended 13 13 12 8 13 6 Total number of meetings held during the ﬁ nancial year – 13 Audit & Risk Management Committee Meetings The number of meetings of the Audit & Risk Management Committee held during the year and the number of meetings attended by each member of the Audit & Risk Management Committee are as follows: Hugh Parsons Sam Doumany Stan Kalinko Sally Herman Number of meetings held while in ofﬁ ce 3 4 4 2 Total number of meetings held during the ﬁ nancial year – 4 Remuneration Committee Meetings Meetings attended 3 4 4 2 The number of meetings of the Remuneration Committee held during the year and the number of meetings attended by each member of the Remuneration Committee are as follows: Sam Doumany Stan Kalinko Sally Herman Number of meetings held while in ofﬁ ce 2 2 2 Total number of meetings held during the ﬁ nancial year – 2 Tax Consolidation Meetings attended 2 2 2 FSA Group Ltd and its 100% owned subsidiaries have formed a tax consolidated group and have entered tax sharing and tax funding arrangements. 180 Group Pty Ltd (controlled by FSA Group Ltd) and its 100% owned subsidiaries have formed a tax consolidated group and have entered tax sharing and tax funding arrangements. Fox Symes Home Loans Pty Ltd (controlled by FSA Group Ltd) and its 100% owned subsidiaries have formed a tax consolidated group and have entered tax sharing and tax funding arrangements. FSA GROUP LIMITED ANNUAL REPORT 2011 23 Directors’ Report cont. for the year ended 30 June 2011 Non-Audit Services The Board of Directors, in accordance with advice from the Audit & Risk Management Committee, is satisﬁ ed that the provision of non-audit services during the year is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. The Directors are satisﬁ ed that the services disclosed below did not compromise the external auditor’s independence for the following reasons: (cid:129) all non-audit services are reviewed and approved by the Audit & Risk Management Committee prior to commencement to ensure they do not adversely affect the integrity and objectivity of the auditor; (cid:129) the nature of the services provided do not compromise the general principles relating to auditor independence as set out in the Institute of Chartered Accountants in Australia and CPA Australia’s Professional Statement F1: Professional Independence; and (cid:129) all non-audit services are performed by persons not involved in the audit. The following fees for non-audit services were paid/payable to the external auditors during the year ended 30 June 2011: Tax consulting services $59,460 Auditor’s Independence Declaration The Auditor’s Independence Declaration forms part of the Directors Report and can be found on page 25. Auditor Details PKF continues in ofﬁ ce in accordance with section 327(4) of the Corporations Act 2001. Corporate Governance In recognising the need for the highest standards of corporate behaviour and accountability, the Directors of FSA Group Ltd support and have adhered to the principles of corporate governance. A Statement of Corporate Governance is separately contained in the Annual Report. Signed in accordance with a resolution of the directors. Tim Odillo Maher Director Sydney 30 August 2011 24 FSA GROUP LIMITED ANNUAL REPORT 2011 Auditor’s Independence Declaration To the Directors of FSA Group Limited LEAD AUDITOR’S INDEPENDENCE DECLARATION UNDER SECTION 307C OF THE CORPORATIONS ACT 2001 To : The Directors FSA Group Limited and the entities it controlled during the year I declare to the best of my knowledge and belief, in relation to the audit for the financial year ended 30 June 2011 there have been: a) no contraventions of the auditor independence requirements as set out in the Corporations Act 2001 in relation to the audit, and b) no contraventions of any applicable code of professional conduct in relation to the audit. PKF Arthur Milner Partner 30 August 2011 Sydney Tel: 61 2 9251 4100 | Fax: 61 2 9240 9821 | www.pkf.com.au PKF | ABN 83 236 985 726 Level 10, 1 Margaret Street | Sydney | New South Wales 2000 | Australia DX 10173 | Sydney Stock Exchange | New South Wales The PKF East Coast Practice is a member of the PKF International Limited network of legally independent member firms. The PKF East Coast Practice is also a member of the PKF Australia Limited national network of legally independent firms each trading as PKF. PKF East Coast Practice has offices in NSW, Victoria and Brisbane. PKF East Coast Practice does not accept responsibility or liability for the actions or inactions on the part of any other individual member firm or firms. Liability limited by a scheme approved under Professional Standards Legislation. FSA GROUP LIMITED ANNUAL REPORT 2011 25 Corporate Governance Statement FSA Group Limited (the Company) and the Board of Directors (the Board) are committed to achieving and demonstrating the highest standards of corporate governance. The Board endorses the 2nd edition of the Australian Securities Exchange (ASX) Corporate Governance Council’s Corporate Governance Principles and Recommendations (ASX Principles) issued in August 2007, including the 2010 amendments. The Company’s Corporate Governance Charter is available on the FSA website www.fsagroup.com.au The table below summarises how the Company complies with the ASX Principles, and if not why not. Principle Number 1 1.1 1.2 1.3 2 2.1 2.2 2.3 2.4 2.5 2.6 3 3.1 3.2 3.3 3.4 3.5 4 4.1 4.2 4.3 4.4 Best Practice Recommendation Lay solid foundations for management and oversight Establish the functions reserved to the Board and those delegated to senior executives and disclose these functions. Disclose the process for evaluating the performance of senior executives. Provide the information in the Guide to reporting on Principle 1. Structure the Board to add value A majority of the Board should be independent Directors. The chair should be an independent Director. The roles of the Chair and Chief Executive Officer or similar roles should not be exercised by the same individual. The Board should establish a nominations committee. Disclose the process for evaluating the performance of the Board, its committees and individual Directors. Provide the information in the Guide to reporting on Principle 2. Promote ethical and responsible decision making Establish a code of conduct and disclose the code or summary of the code as to: • the practices necessary to maintain confidence in the Company’s integrity; • the practices necessary to take into account their legal obligations and the reasonable expectations of their stakeholders; and • the responsibility and accountability of individuals for reporting and investigating reports of unethical practices. Establish a policy concerning diversity and disclose the policy or summary of that policy. The policy should include requirements for the Board to establish measurable objectives for achieving gender diversity for the Board to assess annually both the objectives and progress in achieving them. Disclose in each annual report the measurable objectives for achieving gender diversity set by the Board in accordance with the diversity policy and progress towards achieving them. Disclose in each annual report the proportion of women employees in the whole organisation, women in senior executive positions and women on the Board. Provide the information in the Guide to reporting on Principle 3. Safeguard integrity in financial reporting The Board should establish an audit committee. The audit committee should be structured so that it: • consists only of Non-Executive Directors; • consists of a majority of independent Directors; • is not chaired by the Chair of the Board; and • has at least three members. The audit committee should have a formal Charter. Provide the information in the Guide to reporting on Principle 4. Compliance (Yes/No) Comments Yes Yes Yes Yes Yes Yes No Yes Yes Yes Yes Yes Yes Yes – – – – – – Page 29 – – – – – – – Yes Page 33 Yes Yes Yes Yes No Yes Yes Yes – – – – Page 31 – – – 26 FSA GROuP LimiTED AnnuAl RepoRt 2011 Corporate Governance Statement cont. Principle Number 5 5.1 5.2 6 6.1 6.2 7 7.1 7.2 7.3 7.4 8 8.1 8.2 8.3 8.4 Best Practice Recommendation Make timely and balanced disclosures Establish written policies designed to ensure compliance with ASX Listing Rule disclosure requirements and to ensure accountability at a senior executive level for that compliance and disclose those policies or a summary of those policies. Provide the information in the Guide to reporting on Principle 6. Respect the rights of shareholders Design a communication policy for promoting effective communication with shareholders and encouraging their participation at general meetings and disclose their policy or a summary of that policy. Provide the information in the Guide to reporting on Principle 6. Recognise and manage risk Establish policies for the oversight and management of material business risks and disclose a summary of those policies. The Board should require management to design and implement the risk management and internal control system to manage the Company’s material business risks and report to it on whether those risks are being managed effectively. The Board should disclose that management has reported to it as to the effectiveness of the Company’s management of its material business risks. The Board should disclose whether it has received assurance from the Chief Executive ofﬁ cer (or equivalent) and the Chief Financial Ofﬁ cer (or equivalent) that the declaration provided in accordance with section 295A of the Corporations Act is founded on a sound system of risk management and internal control and that the system is operating effectively in all material respects in relation to ﬁ nancial reporting risks. Provide the information in the Guide to reporting on Principle 7. Remunerate fairly and responsibly The Board should establish a remuneration committee. The remuneration committee should be structured so that it: (cid:129) consists of a majority of independent Directors; (cid:129) is chaired by an independent Chair; and (cid:129) has at least three members Clearly distinguish the structure of Non-Executive Directors’ remuneration from that of executive Directors and senior executives. Provide the information in the Guide to reporting on Principle 8. Compliance (Yes/No) Comments Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes – – – – – – – – – – – – – – Set out overleaf is commentary on the practical application of each of the ASX Principles noted above. FSA GROUP LIMITED ANNUAL REPORT 2011 27 Corporate Governance Statement cont. Principle 1: Lay solid foundations for management and oversight The Directors are responsible to the shareholders for promoting and managing the performance of the Company in both the short and longer term. Their focus is to enhance the interests of shareholders and other key stakeholders and to ensure the Company is properly managed. The functions, powers and responsibilities of the Board are governed by the Corporations Act and general law. The Board has established the functions reserved for the Board and those delegated to senior executives and disclosure of those functions are included in the Corporate Governance Charter which can be found on the Company’s website. Principle 2: Structure the Board to add value The Board operates in accordance with the broad principles set out in the Corporate Governance Charter which includes: (cid:129) to aim for, so far as is practicable given the size of the Company, a majority of the Board being independent directors; (cid:129) to aim for, so far as is practicable given the size of the Company, the appointment of a chairperson who is an independent director; (cid:129) to aim for, so far as is practicable given the size of the Company, a chairperson who is not the chief executive ofﬁ cer; (cid:129) to aim for, so far as is practicable given the size of the Company, a board comprising of members with diverse backgrounds; and (cid:129) to have at least three directors. The Non-Executive Directors meet from time to time without the Executive Directors present. Directors’ independence In assessing the independence of directors, the Company has regard to Principle 2 of the Corporate Governance Principles and Recommendations and regards an independent director as a Non-Executive director (that is, not a member of management) who: (cid:129) is not a substantial shareholder of the Company or an ofﬁ cer of, or otherwise associated directly with, a substantial shareholder of the Company; (cid:129) within the last three years has not been employed in an executive capacity by the Company or another Company member, or been a director after ceasing to hold any such employment; (cid:129) within the last three years has not been a principal of a material professional advisor or a material consultant to the Company or another Company member, or an employee materially associated with the service provided; (cid:129) is not a material supplier or customer of the Company or other group member, or an ofﬁ cer of or otherwise associated directly or indirectly with a material supplier or customer; (cid:129) has no material contractual relationship with the Company or another group member other than as a director of the Company; (cid:129) has not served on the Board for a period which could, or could reasonably be perceived to, materially interfere with the directors’ ability to act in the best interests of the Company; (cid:129) is free from any interest and any business or other relationship which could, or could reasonably be perceived to, materially interfere with the directors’ ability to act in the best interests of the Company. The Board regularly assesses whether each Non-Executive Director is independent. Board members The names, skills and experience of the Directors in ofﬁ ce at the date of this Statement, and the period of ofﬁ ce of each Director, are set out in the Directors’ Report. At the date of signing the Directors’ Report, the Board comprised two Executive Directors and three Non-Executive Directors (including the Chairman). The three Non-Executive Directors have no relationships adversely affecting independence and so are deemed independent under the principles set out above. Mr Timothy Odillo Maher, an Executive Director, is a substantial shareholder of the Company and accordingly he is not considered to be independent of the Company based on the ASX Principles. Mr Odillo Maher has a long association with FSA Group and the Board considers that it is in the best interests of all shareholders to have a Director with Mr Odillo Maher’s industry and business expertise and Company history as a member of the Board. Ms Deborah Southon, an Executive Director, is a substantial shareholder of the Company and accordingly she is not considered to be independent of the Company based on the ASX Principles. Ms Southon has a long association with FSA Group Limited and the Board considers that it is in the best interests of all shareholders to have a Director with Ms Southon’s industry and business expertise and Company history as a member of the Board. 28 FSA GROUP LIMITED ANNUAL REPORT 2011 Corporate Governance Statement cont. Term of ofﬁ ce The Company’s Constitution requires that one third (or the nearest number thereto but not less than one third) of the Directors, other than the Managing Director, must retire from ofﬁ ce at each Annual General Meeting. Director/s retiring by rotation are eligible for re-election. The Company’s Constitution does not provide exclusions from re-election by rotation for the Executive Directors. The Chairperson The Chairperson is responsible for leadership of the Board, for efﬁ cient organisation and conduct of the Board’s function and the brieﬁ ng of all Directors in relation to issues arising at Board meetings. The Chairperson is also responsible for shareholder communication and arranging Board performance evaluation. Chief Executive Ofﬁ cer The Chief Executive Ofﬁ cer and/or Joint Executive Directors are responsible for running the affairs of the Company under delegated authority from the Board and to implement the policies and strategies set by the Board. In carrying out these responsibilities, the Chief Executive Ofﬁ cer and/or Joint Executive Directors must report to the Board in a timely manner and ensure all reports to the Board present a true and fair view of the Company’s ﬁ nancial position and operating results. The Chief Executive Ofﬁ cer and/or Joint Executive Directors together with the Chief Financial Ofﬁ cer shall be required to state in writing to the Board that in accordance with section 295A of the Corporations Act 2001 and the relevant assurances required under recommendation 7.3 of the ASX Principles that to the best of their knowledge and belief: (cid:129) the statements made in relation to the ﬁ nancial integrity of the ﬁ nancial reports are founded on a sound system of risk management and internal compliance and control; (cid:129) the system of risk management in operation at 30 June 2011 implements the policies adopted and delegated by the Board and was operating effectively; and (cid:129) the systems relating to ﬁ nancial reporting were operating effectively in all material respects. Nomination Committee a separate Nominations Committee concluded that the Company was not of a size nor are its affairs of such complexity as to justify the formation of this Committee. Board selection process The Board, acting in the capacity of the Nominations Committee, and observing the Nominations Committee Charter contained in the Corporate Governance Charter properly assesses prospective Directors. In doing so it ensures there are complementary board skills and experience in place, and where necessary, engages consultants to assist in this process. The Board seeks to have a balanced diversity in Board members and currently has two female Board members out of a Board comprising ﬁ ve members. Induction and education The induction provided to new Directors enables them to actively participate in Board decision-making as soon as possible. It also ensures that they have a full understanding of the Company’s ﬁ nancial position, strategies, operations and risk management policies. It also explains the respective rights, duties, responsibilities and roles of the Board. Directors are encouraged to participate in continuing education so as to maintain and update their skills. Company Secretary The Company Secretary’s appointment is determined by the Board, and is accountable to the Board, through the Chairman, on all governance matters. Commitment Details of the attendance of Directors at Board and committees of the Board in the year ended 30 June 2011 are disclosed on page 23 of the annual report. Non-Executive Directors are expected to spend at least 20 days a year preparing for and attending Board and Committee meetings and associated Board activities. The commitments of Non-Executive Directors are considered by the Board prior to the Director’s appointment and are reviewed each year as part of the annual performance assessment. The Company has not established a Nominations Committee and the Board currently performs the functions of this Committee, and in doing so, observes the Nominations Committee Charter which is incorporated into the Corporate Governance Charter. The Directors in deciding not to have Prior to appointment or being submitted for re-election, each Non-Executive Director is required to speciﬁ cally acknowledge that they have and will continue to have the time available to discharge their responsibilities to the Company. FSA GROUP LIMITED ANNUAL REPORT 2011 29 Corporate Governance Statement cont. Independent professional advice Directors have the right, in connection with their duties and responsibilities, to seek independent professional advice at the Company’s expense. Prior approval of the Chairman is required, but this will not be unreasonably withheld. The advice obtained must be made available to all Board members. Board performance The Board undertakes an annual self-assessment of the performance of the Board as a whole (including its Committees and governance processes) and as part of this process considers Board renewal as and when appropriate. Performance of individual Directors is assessed against a range of criteria. This review includes assessing the ability of the Director to consistently create shareholder value, contribute to the development of strategies, participate in risk identiﬁ cation, mentoring senior management, consider the views of other Directors and members of management and key third party stakeholders. The performance assessment also considers the ability for the Director to discharge his duties and obligations to the Company. Board Committees The Board has established an Audit & Risk Management Committee and a Remuneration Committee to assist in the execution of its duties and to allow detailed consideration of complex issues. Both committees comprise a majority of Non-Executive Directors. Each Committee has its own charter which sets out its role and responsibilities, composition, structure, membership requirements and the manner in which the committee is to operate. Charters are reviewed on an annual basis. All matters determined by the committees are submitted to the Board as recommendations for Board consideration. Minutes of committee meetings are tabled at the subsequent Board meeting. Principle 3: Promote ethical and responsible decision-making Code of Conduct A Code of Conduct has been determined and is set out in the Corporate Governance Charter. The Board, management and employees of the Company are encouraged to comply when dealing with each other, shareholders, and the broader community, and covers the following areas: (cid:129) Compliance required with legal obligations, responsibilities to shareholders and the ﬁ nancial community generally (cid:129) Responsibilities to clients, customers and consumers (cid:129) Employment practices which ensures that the Company will employ the best available staff, both male and female, from a diverse background, with skills required to carry out their roles (cid:129) The Company will ensure that diversity objectives are adopted at all levels of the Company (cid:129) The Company will ensure a safe work place and maintain proper occupational health and safety practices commensurate with the nature of the Company’s business and activities (cid:129) Responsibility to the community (cid:129) Responsibility to the individual (cid:129) Obligations relative to fair trading and dealing. Gender diversity A gender diversity policy has also been adopted and is included as a separate policy together with the Corporate Governance Charter on the Company’s website. The Board is currently considering suitable diversity targets to work towards achieving greater diversity at all levels of the workforce. The objectives will be adopted by the Board and will then be assessed by the Board on an annual basis. Data which details the proportion of women employees in the Company, women in senior executive positions and women on the Board is contained at page 33 of the annual report. Conﬂ icts of interest The Board, management and employees must not involve themselves in situations where there is a real or apparent conﬂ ict of interest between them as individuals and the interest of the Company (excluding those matters which may be subject to legal professional privilege). Where a real or apparent conﬂ ict of interest arises the matter should be brought to the attention of the Chairperson in the case of a board member or the Managing Director (if any), the Managing Director or Chief Executive Ofﬁ cer in the case of a member of Management and a supervisor in the case of an employee, so that it may be considered and dealt with in an appropriate manner for all concerned. Compliance with the code Any breach of compliance with this code is to be reported directly to the Chief Executive Ofﬁ cer, Managing Director or Chairperson, as appropriate. 30 FSA GROUP LIMITED ANNUAL REPORT 2011 Corporate Governance Statement cont. Periodic review of code The Company will monitor compliance with the code periodically by liaising with the Board, Management and staff especially in relation to any areas of difﬁ culty which arise from the code and any other ideas or suggestions for improvement of the code. Suggestions for improvements or amendments to the code can be made at any time. Code of conduct for employees (including contractors) Ms Sally Herman, was appointed a Director on 24 January 2011, and a member of the Audit & Risk Management Committee from that date. Mr Hugh Parsons, who had been a Director and a member of the Audit & Risk Management Committee, resigned from both positions on 31 May 2011. Details of members’ qualiﬁ cations and their attendance at Audit & Risk Management Committee meetings are set out in the Directors’ Report on pages 15, 16 and 23, respectively. The Company shall ensure that the above principles are implemented and adopted by employees and contractors of the Company. The Committee’s primary audit function is set out in the Corporate Governance Charter, and which is included on the Company’s website. Trading in company securities by directors, senior management and employees The Company issued a Securities Trading Policy with effect from 1 January 2011 which regulates dealings by Directors, senior management and employees in shares, options and other securities issued by the Company. The Securities Trading Policy provides that trading is prohibited in the period from 1 January and 1 July each year until the ﬁ nancial results are released to the Australian Securities Exchange in or around the third week of February and August respectively with such periods coinciding with the release of the half year and full year ﬁ nancial results. A copy of this policy is available on the Company’s website. Principle 4: Safeguard integrity in ﬁ nancial reporting Audit & Risk Management Committee The Board has an Audit & Risk Management Committee to advise on the establishment and maintenance of a framework of internal control and appropriate ethical standards for the management of the Company. The Committee consists of the following independent Non-Executive Directors: (cid:129) Mr Sam Doumany (Committee Chairman); (cid:129) Ms Sally Herman; and (cid:129) Mr Stan Kalinko. When Mr Doumany was appointed as Chairman of the Audit & Risk Management Committee (upon the resignation of Mr Parsons) the Board acknowledged that this appointment was contrary to the ASX Principles which provides that the Chairman of the Company should not also be the Chairman of the Audit & Risk Management Committee. However they noted that the appointment was transitionary in nature and situation would be remedied when a suitable person became available. External Auditor The Company and Audit & Risk Management Committee policy is to appoint an external auditor who clearly demonstrates quality and independence. The performance of the external auditor is reviewed annually. PKF was appointed as the external auditor in 2003 and it is PKF’s policy to rotate audit engagement partners on listed companies at least every ﬁ ve years. An analysis of fees paid to the external auditor, including a break-down of fees for non-audit services, is provided in the Directors’ Report and in the notes to the ﬁ nancial statements. The external auditor provides a declaration of their independence to the Audit & Risk Management Committee each time they report to the Company. The external auditor is requested to attend the Annual General Meeting and be available to answer shareholder questions about the conduct of the audit and the preparation and content of the audit report. Principle 5: Make timely and balanced disclosures The Company has an established policy and procedure for timely disclosure of material information concerning the Company. This includes internal reporting procedures to ensure that any required market announcements are reported to the Company Secretary in a timely manner. The Company Secretary has been nominated as the person responsible for communication with the ASX. All information disclosed to the ASX is posted on the Company’s corporate website as soon as it is disclosed to the ASX. When analysts are briefed following half year and full year results announcements, the material used in the presentations is released to the ASX prior to the commencement of the brieﬁ ng. This information is also posted on the Company’s corporate website. FSA GROUP LIMITED ANNUAL REPORT 2011 31 Corporate Governance Statement cont. The Company is committed to ensuring that all stakeholders and the market are provided with relevant and accurate information regarding its activities in a timely manner. A copy of the disclosure policy is incorporated in the Company’s corporate website. Principle 6: Respect the rights of shareholders The Company aims to keep shareholders informed of the Company’s performance and all major developments in an ongoing manner. Information is communicated to shareholders through: (cid:129) ﬁ nancial reports (including the full year ﬁ nancial report, the preliminary ﬁ nal report, and the half-year ﬁ nancial report) all of which are published on the Company’s corporate website and distributed to shareholders where nominated; (cid:129) the Annual General Meeting, and any other formally convened Company meetings; and (cid:129) all other information released to the ASX is posted to the Company’s corporate website. The Company’s corporate website maintains, at a minimum, information about the last three years’ press releases or announcements. A copy of the Shareholder Communications Policy is contained in the Corporate Governance Charter and is available on the Company’s corporate website. Principle 7: Recognise and manage risk The Board, through the Audit & Risk Management Committee, is responsible for ensuring the adequacy of the Company’s risk management and compliance framework and system of internal controls and for regularly reviewing its effectiveness. Considerable importance is placed on maintaining a strong control environment. There is an organisation structure with clearly drawn lines of accountability and delegation of authority. The Board actively promotes a culture of quality and integrity. The Company has implemented a risk management system based on ASX Principles and the Audit & Risk Management Committee’s additional function is to assist the Board in discharging its responsibility to exercise due care, diligence and skill in relation to the Company by: (cid:129) ensuring the development of an appropriate risk management policy framework that will provide guidance to Management in implementing appropriate risk management practices throughout the Company’s operations, practices and systems; (cid:129) deﬁ ning and periodically reviewing risk management as it applies to the Company and clearly identify all stakeholders; (cid:129) ensuring the Committee clearly communicates the Company’s risk management philosophy, policies and strategies to Directors, Management, employees, contractors and appropriate stakeholders; (cid:129) ensuring that Directors and Management establish a risk aware culture which reﬂ ects the Company’s risk policies and philosophies; (cid:129) reviewing methods of identifying broad areas of risk and setting parameters or guidelines for business risk reviews; (cid:129) making informed decisions regarding business risk management, internal control systems, business policies and practices and disclosures; and (cid:129) considering capital raising, treasury and market trading activities with particular emphasis on risk treatment strategies, products and levels of authorities. The Executive Directors are responsible for identifying, evaluating and monitoring risk in accordance with the risk management framework and are responsible for the accuracy and validity of risk information reported to the Board and also for ensuring clear communication to the Board on risk throughout the Company. In particular, at the Board and Executive Directors’ strategy planning sessions held throughout the year an evaluation is undertaken to identify key business and ﬁ nancial risks which could prevent the Company from achieving its objectives. Additionally, a formal risk assessment process is part of any major business acquisitions, major capital expenditures or signiﬁ cant business initiatives. Certiﬁ cation of ﬁ nancial reports The Chief Executive Ofﬁ cer and/or Joint Executive Directors together with the Chief Financial Ofﬁ cer shall be required to state in writing to the Board that in accordance with section 295A of the Corporations Act 2001 and the relevant assurances required under recommendation 7.3 of the ASX Principles that to the best of their knowledge and belief: (cid:129) the statements made in relation to the ﬁ nancial integrity of the ﬁ nancial reports are founded on a sound system of risk management and internal compliance and control; (cid:129) the system of risk management in operation at 30 June 2011 implements the policies adopted and delegated by the Board and was operating effectively; and (cid:129) the systems relating to ﬁ nancial reporting were operating effectively in all material respects. 32 FSA GROUP LIMITED ANNUAL REPORT 2011 Corporate Governance Statement cont. Principle 8: Remunerate fairly and responsibly Remuneration Committee In February 2011, the Board established a Remuneration Committee which operates in accordance with the Corporate Governance Charter. The Committee is responsible for the review and recommendation to the Board on the following matters – (cid:129) the Company’s remuneration, recruitment, retention and termination policies and procedures for senior executives Diversity The Board is committed to having an appropriate blend of diversity on the Board and in the Group’s senior executive positions. The Board has established a policy regarding gender, age, ethnic and cultural diversity, details of the policy are available on the Company’s website. The key elements of the diversity policy are to work towards: (cid:129) increased gender diversity in the Board and senior executive positions (cid:129) an annual assessment by the Board of performance (cid:129) senior executives’ remuneration and incentives against the objectives. (cid:129) superannuation arrangements (cid:129) remuneration framework for Directors (in consultation with external consultants when appropriate) (cid:129) remuneration by gender The initial Committee comprises the following independent Non-Executive Directors: (cid:129) Mr Sam Doumany (Committee Chairman); The Group’s current gender representation is detailed below: 30 June 2011 30 June 2010 Female (%) Male (%) Female (%) Male (%) Board Senior Executive Group 40 22 43 60 78 57 20 22 45 80 78 55 (cid:129) Ms Sally Herman and (cid:129) Mr Stan Kalinko. The performance of senior executives are reviewed by the Executive Directors, and in accordance with guidelines issued by the Remuneration Committee with the review having taken place in June 2011. Details of these Directors’ qualiﬁ cations and their attendance at Remuneration Committee meetings are set out in the Directors’ Report on pages 15, 16 and 23 respectively. Structure of remuneration Details of the nature and amount of each element of remuneration for Executive Directors and senior management of the Company are set out in the “Remuneration Report” section of the Directors’ Report. Fees and payments to Non-Executive Directors reﬂ ect the demands which are made on, and the responsibilities of, the Directors. Fees and payments are reviewed annually by the Chairman, and Non-Executive Director remuneration takes the form of a set fee plus superannuation entitlements and where applicable includes an allowance for Board Committees. The maximum aggregate amount of fees that can be paid to Non-Executive Directors is subject to approval by shareholders at the Annual General Meeting. The maximum amount which has been approved by the Company’s shareholders for payment to Non-Executive Directors is $500,000. Fees for Non-Executive Directors are not linked to the performance of the Company. FSA GROUP LIMITED ANNUAL REPORT 2011 33 Statement of Comprehensive Income for the year ended 30 June 2011 Revenue and other income Fees from services Finance income Finance expense Net ﬁ nance income Other gains/(losses) Total revenue and other income net of ﬁ nance expense Consolidated Entity 2011 $ 2010 $ Notes 2 2 2 2 2 40,425,188 38,473,602 30,134,445 22,250,254 (16,120,165) (10,848,977) 14,014,280 11,401,277 (299,964) 905,487 54,139,504 50,780,366 Share of proﬁ ts of an associate using the equity accounting method 28 23,981 18,528 Expenses from continuing activities Proﬁ t before income tax Income tax expense Proﬁ t after income tax Other Comprehensive Income Share of Other Comprehensive income of Associates 3 (38,835,019) (37,930,772) 15,328,466 12,868,122 4(a) (4,312,875) (3,690,910) 11,015,591 9,177,212 – – – – Total Comprehensive income for the year 11,015,591 9,177,212 Total Comprehensive income for the year attributable to: Non-Controlling Interests Owners of the parent Earnings per share Basic earnings per share (cents per share) Diluted earnings per share (cents per share) 2,019,876 1,656,648 8,995,715 7,520,564 11,015,591 9,177,212 6 6 6.51 6.51 5.82 5.82 The Statement of Comprehensive Income should be read in conjunction with the Notes to the Financial Statements. 34 FSA GROUP LIMITED ANNUAL REPORT 2011 Statement of Financial Position as at 30 June 2011 Current Assets Cash and cash equivalents Trade and other receivables Other assets Total Current Assets Non-Current Assets Trade and other receivables Investments in associates Plant and equipment Investment property Other ﬁ nancial assets Deferred tax assets Intangible assets Total Non-Current Assets Assets ﬁ nanced by non-recourse ﬁ nancial liabilities Cash and cash equivalents Mortgage ﬁ nance assets Total assets ﬁ nanced by non-recourse ﬁ nancial liabilities Total Assets Current Liabilities Trade and other payables Current tax liabilities Borrowings Provisions Total Current Liabilities Non-Current Liabilities Borrowings Provisions Deferred tax liabilities Total Non-Current Liabilities Non-Recourse Financial Liabilities Borrowings Total Non-Recourse Financial Liabilities Total Liabilities Net Assets Equity Share capital Reserves Retained earnings Non-Controlling Interest Total Equity Consolidated Entity 2011 $ 2010 $ Notes 7 8 9 8 28 13 14 10 4c 15 9,413,356 7,394,759 36,618,162 32,564,893 891,090 245,697 46,922,608 40,205,349 27,856,932 24,508,906 63,975 405,003 301,547 600,420 213,760 47,188 450,003 313,051 898,050 40,788 3,502,277 3,413,633 32,943,914 29,671,619 7 7,394,118 6,605,211 11 228,964,764 200,434,621 236,358,882 207,039,832 316,225,404 276,916,800 16 10,519,345 12,750,551 17 18 17 18 4d 1,409,212 629,453 841,313 3,361,542 812,435 588,535 13,582,305 17,330,081 16,246,220 11,893,779 343,055 251,012 10,624,047 8,150,799 27,213,322 20,295,590 17 220,865,314 194,541,639 220,865,314 194,541,639 261,660,941 232,167,310 54,564,463 44,749,490 19 20 11,692,255 11,692,255 745,831 664,374 39,285,112 30,289,397 2,841,265 2,103,464 54,564,463 44,749,490 The Statement of Financial Position should be read in conjunction with the Notes to the Financial Statements. FSA GROUP LIMITED ANNUAL REPORT 2011 35 Statement of Changes in Equity for the year ended 30 June 2011 Consolidated Entity Share Capital $ Reserves $ Retained Non-Controlling Interest Earnings $ $ Total $ Balance at 1 July 2009 7,137,472 611,570 22,768,833 1,550,591 32,068,466 Total Comprehensive Income for the year attributable to members of the parent Total Comprehensive Income for the year attributable to Non-Controlling Interests Shares issued Issues costs Redemption of Convertible Redeemable Preference Shares Share-based payment expense Distributions to Non-Controlling Interests – – 5,422,000 (247,905) (619,312) – – – – – – – 52,804 – 7,520,564 – 7,520,564 – – – – – – 1,656,648 1,656,648 – – – – 5,422,000 (247,905) (619,312) 52,804 (1,103,775) (1,103,775) Balance at 30 June 2010/1 July 2010 11,692,255 664,374 30,289,397 2,103,464 44,749,490 Total Comprehensive Income for the year attributable to members of the parent Total Comprehensive Income for the year attributable to Non-Controlling Interests Share-based payment expense Distributions to Non-Controlling Interests – – – – – – 81,457 – 8,995,715 – 8,995,715 – – – 2,019,876 2,019,876 – 81,457 (1,282,075) (1,282,075) Balance at 30 June 2011 11,692,255 745,831 39,285,112 2,841,265 54,564,463 The Statement of Changes in Equity should be read in conjunction with the Notes to the Financial Statements. 36 FSA GROUP LIMITED ANNUAL REPORT 2011 Statement of Cash Flows for the year ended 30 June 2011 Cash ﬂ ows from operating activities Receipts from customers and debtors Payments to suppliers and employees Finance income received Finance cost paid Cash ﬂ ows from operations Net cash payments for institutional creditor distributions Income tax paid Notes Consolidated Entity 2011 $ 2010 $ Inﬂ ows/ (Outﬂ ows) Inﬂ ows/ (Outﬂ ows) 36,971,898 19,021,929 (42,115,321) (27,418,416) 29,088,744 22,178,148 (15,450,044) (8,520,112) 8,495,277 5,261,549 (1,653,810) (2,128,935) (1,200,840) (674,804) Net cash inﬂ ow from operating activities 21 5,640,627 2,457,810 Cash ﬂ ows from investing activities Acquisition of property, plant and equipment Acquisition of intangibles Proceeds from disposal of property, plant and equipment Net increase in mortgage ﬁ nance assets Net decrease in bridging ﬁ nance assets Net increase in factoring ﬁ nance assets Net increase in other loans Net cash outﬂ ow from investing activities Cash ﬂ ows from ﬁ nancing activities Net proceeds from borrowings Payment of distributions to Non-Controlling interests – Warehouse Trust Share issue expenses Proceeds from share issues Net cash inﬂ ow from ﬁ nancing activities Net (decrease)/increase in cash and cash equivalents Cash and cash equivalents at the beginning of the ﬁ nancial year (261,248) (207,814) (220,862) (279,394) – 25,502 (27,606,481) (53,971,177) 373,458 1,557,558 (1,528,144) (6,707,823) (476,000) – (29,719,277) (59,583,148) 27,666,107 47,122,882 (779,953) (863,639) – – (47,905) 5,222,000 26,886,154 51,433,338 2,807,504 (5,692,000) 13,999,970 19,691,970 Cash and cash equivalents at the end of the ﬁ nancial year 7 16,807,474 13,999,970 The Statement of Cash Flows should be read in conjunction with the Notes to the Financial Statements. FSA GROUP LIMITED ANNUAL REPORT 2011 37 Notes to the Financial Statements for the year ended 30 June 2011 Note 1. Summary of signiﬁ cant accounting policies The ﬁ nancial statements include the ﬁ nancial statements of FSA Group Ltd (“the Parent Entity” or “the Company”) and the Consolidated Entity (or “the Group”) consisting of FSA Group Ltd and its controlled entities. FSA Group Ltd is a listed public company, incorporated and domiciled in Australia. The ﬁ nancial statements are general purpose ﬁ nancial statements that have been prepared in accordance with Australian Accounting Standards, including Australian Accounting Interpretations, other authoritative pronouncements of the Australian Accounting Standards Board and the Corporations Act 2001. The consolidated ﬁ nancial statements of the Group and the ﬁ nancial statements of the Company comply with International Financial Reporting Standards (IFRSs) and interpretations adopted by the International Accounting Standards Board (IASB). The following is a summary of the material accounting policies adopted in the preparation of the ﬁ nancial statements. The accounting policies have been consistently applied, unless otherwise stated. The ﬁ nancial statements were authorised for issue by the directors on 30 August 2011. Basis of preparation The ﬁ nancial statements are presented in Australian dollars. Reporting basis and conventions The ﬁ nancial statements are based on historical costs modiﬁ ed by the revaluation of selected non-current assets, and ﬁ nancial assets and ﬁ nancial liabilities for which the fair value basis of accounting has been applied. These items in the Statement of Financial Position are: (cid:129) Loans and receivables at amortised cost; and (cid:129) Other ﬁ nancial assets at fair value through proﬁ t or loss (“FVTPL”) Accounting Policies (a) Principles of Consolidation A controlled entity is any entity FSA Group Ltd has the power to control the ﬁ nancial and operating policies so as to obtain beneﬁ ts from its activities. A list of controlled entities is contained in Note 12 to the ﬁ nancial statements. All inter-company balances and transactions between entities in the Group, including any unrealised proﬁ ts or losses, have been eliminated on consolidation. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with those policies applied by the Parent Entity. Where controlled entities have entered or left the Group during the year, their operating results have been included from the date control was obtained or until the date control ceased. Non-Controlling interests in equity and results of the entities controlled are shown as separate items in the consolidated ﬁ nancial statements. (b) Income Tax The charge for current income tax expense is based on the proﬁ t for the year adjusted for any non-assessable or disallowed items. It is calculated using the tax rates that have been enacted or are substantially enacted by the reporting date. Deferred tax is accounted for using the “balance sheet” liability method in respect of temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the ﬁ nancial statements. No deferred income tax is recognised from the initial recognition of an asset or liability, excluding a business combination, where there is no effect on accounting or taxable proﬁ t or loss. Deferred tax is calculated at the tax rates expected to apply to the period when the asset is realised or liability is settled. Deferred tax is credited in the Statement of Comprehensive Income except where it relates to items that may be credited directly to equity, in which case the deferred tax is adjusted directly against equity. Deferred income tax assets are recognised to the extent that it is probable that future tax proﬁ ts will be available against which deductible temporary differences and unused tax losses can be utilised. The amount of beneﬁ ts brought to account or which may be realised in the future is based on the assumption that no adverse change will occur in income taxation legislation and the anticipation that the Group will derive sufﬁ cient future assessable income to enable the beneﬁ t to be realised and comply with the conditions of deductibility imposed by the law. Tax consolidation FSA Group Ltd and its wholly-owned Australian subsidiaries have formed an income tax consolidated group under the Tax Consolidation Regime. Additionally, 180 Group Pty Ltd and its wholly-owned Australian subsidiaries and Fox Symes Home Loans Pty Ltd and its wholly-owned Australian subsidiaries have also formed income tax consolidated groups under the Tax Consolidation Regime. 38 FSA GROUP LIMITED ANNUAL REPORT 2011 Notes to the Financial Statements cont. for the year ended 30 June 2011 Note 1. Summary of signiﬁ cant accounting policies cont. FSA Group Ltd, 180 Group Pty Ltd and Fox Symes Home Loans Pty Ltd as head entities of their respective tax consolidated groups and the controlled entities in each group continue to account for their own current and deferred tax amounts. These tax amounts are measured as if each entity in the tax consolidated group continues to be a standalone taxpayer in its own right. In addition to its own current and deferred tax amounts, the head entity of each tax consolidated group also recognises the current tax liabilities (or assets) and the deferred tax assets arising from unused tax losses and unused tax credits assumed from controlled entities in the tax consolidated group. The respective tax consolidated groups have entered into tax sharing agreements whereby each company in the group contributes to the income tax payable of the consolidated group. (c) Financial instruments Non-derivative ﬁ nancial instruments Non-derivative ﬁ nancial instruments comprise investments in equity and debt securities, trade and other receivables, cash and cash equivalents, loans and borrowings and trade and other payables. Non-derivative ﬁ nancial instruments are recognised initially at fair value plus, for instruments not at fair value through proﬁ t and loss, any directly attributable transaction costs, except as described below. Subsequent to initial recognition, non-derivative ﬁ nancial instruments are measured as described below. A ﬁ nancial instrument is recognised if the Group becomes a party to the contractual provisions of the instrument. Financial assets are de-recognised if the Group’s contractual rights to cashﬂ ows from the ﬁ nancial assets expire or the Group transfers the ﬁ nancial asset to another party without retaining control or substantially all the risks and rewards of the asset. Regular way purchases and sales of ﬁ nancial assets are accounted for at trade date i.e. the date the Group commits itself to purchase or sell an asset. Financial liabilities are de-recognised if the Group’s obligations speciﬁ ed in the contract expire, are discharged or cancelled. Cash and cash equivalents comprise cash balances and call deposits. Bank overdrafts that are repayable on demand and form an integral part of the Group’s cash management are included as a component of cash and cash equivalents for the purposes of the Statement of Cash Flows. Ordinary share capital Incremental costs directly attributable to the issue of ordinary shares and share options are recognised as a deduction from equity net of any related income tax beneﬁ t. Held-to-maturity investments If the Group has the positive intent and ability to hold debt securities to maturity, then they are classiﬁ ed as held-to- maturity. Held-to-maturity investments are measured at amortised cost using the effective interest method, less any impairment losses. Available-for-sale ﬁ nancial assets The Group’s investments in equity securities and certain debt securities are classiﬁ ed as available-for-sale ﬁ nancial assets. Subsequent to initial recognition, they are measured at fair value and changes therein, other than impairment losses and foreign exchange gains and losses on available- for-sale monetary items are recognised as a separate component of equity. When an investment is derecognised, the cumulative gain or loss in equity is transferred to proﬁ t or loss. Investments at fair value through proﬁ t or loss An instrument is classiﬁ ed as at fair value through proﬁ t or loss if it is held for trading or is designated as such upon initial recognition. Financial instruments are designated at fair value through proﬁ t or loss if the Group manages such investments and makes purchase and sale decisions based on their fair value in accordance with the Group’s documented risk management or investment strategy. Upon initial recognition, attributable transaction costs are recognised in proﬁ t or loss when incurred. Financial instruments at fair value through proﬁ t or loss are measured at fair value, and changes therein are recognised in proﬁ t or loss. Loans and Receivables Loans and receivables are held at amortised cost. Loan assets held at amortised cost are non-derivative ﬁ nancial instruments with ﬁ xed or determinable payments that are not quoted in an active market. They arise when a mortgage loan is originated in the Statement of Financial Position. These are accounted for at amortised cost using the effective interest method. FSA GROUP LIMITED ANNUAL REPORT 2011 39 Notes to the Financial Statements cont. for the year ended 30 June 2011 Note 1. Summary of signiﬁ cant accounting policies cont. (d) Property, plant and equipment Property, plant and equipment Property, plant and equipment are measured on the cost basis less accumulated depreciation and accumulated impairment losses. Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic beneﬁ ts associated with the item will ﬂ ow to the Group and the cost of the item can be measured reliably. All other repairs and maintenance are charged to the Statement of Comprehensive Income during the ﬁ nancial year in which they are incurred. Depreciation Property, plant and equipment are depreciated over their useful lives to the Group commencing from the time the asset is held ready for use. (f) Leases Leases of property plant and equipment where the Group, as lessee, has substantially all the risks and beneﬁ ts incidental to the ownership of the asset are classiﬁ ed as ﬁ nance leases. Finance leases are capitalised by recording an asset and a liability at the lower of the amounts equal to the fair value of the leased property or the present value of the minimum lease payments, including any guaranteed residual values. Lease payments are allocated between the reduction of the lease liability and the lease interest expense for the year. Leased assets are depreciated on a straight-line basis over the shorter of their estimated useful lives or the lease term. Lease payments for operating leases, where substantially all the risks and beneﬁ ts remain with the lessor are charged to the Statement of Comprehensive Income on a straight line basis over the period of the lease. The useful lives used for each class of asset are: (g) Impairment of assets Class of Asset Plant and equipment Computers and Ofﬁ ce Equipment Furniture and Fittings Motor Vehicles Useful life 2 to 5 years 2 to 5 years 2 to 5 years 5 years The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each reporting date. An asset’s carrying amount is written down immediately to its recoverable amount if the assets carrying amount is greater than its estimated recoverable amount. Gains and losses on disposal are determined by comparing proceeds with the carrying amount. These gains or losses are included in the Statement of Comprehensive Income. (e) Investment property Investment property is property held either to earn rental income or for capital appreciation or both. Investment properties are measured at cost less accumulated depreciation. The carrying amount of an asset in this class is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount. Investment properties have a useful life of 40 years. At each reporting date, the Group reviews the carrying values of its assets to determine whether there is any indication that those assets have been impaired. If such an indication exists, the recoverable amount of the asset, being the higher of the asset’s fair value less costs to sell and value in use, is compared to the asset’s carrying value. Any excess of the asset’s carrying value over its recoverable amount is expensed to the Statement of Comprehensive Income. Where it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs. (h) Employee beneﬁ ts Provision is made for the Group’s liability for employee beneﬁ ts arising from services rendered by employees to reporting date. Employee beneﬁ ts that are expected to be settled within one year have been measured at the amounts expected to be paid when the liability is settled, plus related on-costs. Employee beneﬁ ts payable later than one year have been measured at the present value of the estimated future cash outﬂ ows to be made for those beneﬁ ts. 40 FSA GROUP LIMITED ANNUAL REPORT 2011 Notes to the Financial Statements cont. for the year ended 30 June 2011 (i) Provisions Provisions are recognised when the Group has a legal or constructive obligation, as a result of past events, for which it is probable that an outﬂ ow of economic beneﬁ ts will result and that outﬂ ow can be reliably measured. (j) Revenue recognition Revenue is recognised when it is probable that the economic beneﬁ ts will ﬂ ow to the entity and the revenue can be reliably measured. The following speciﬁ c recognition criteria must also be met before revenue is recognised: Rendering of Services – Personal Insolvency When the outcome of a contract to provide services under the Bankruptcy Act can be estimated reliably, revenue is recognised by reference to the right to be compensated for services and where the stage of completion of the service can be reliably estimated, speciﬁ cally: Debt agreement application fees Debt agreement application fees Upon the completion of preparing the debt agreement proposal for consideration by the creditors and the Insolvency and Trustee Service of Australia (ITSA). Debt agreement administration fees Debt agreement administration fees At the date of approval of the debt agreement proposal by a majority of the vote value of creditors. Trustee fees bankruptcy and personal Trustee fees bankruptcy and personal insolvency agreements insolvency agreements Trustee fees are recognised as work in progress and time billed. Fee income is only recognised to the extent fees have been approved by creditors. Reﬁ nance fees When the outcome of a contract to provide services can be estimated reliably, either upon receipt of upfront fees and subsequent trail commission, in the case of non-conforming lending, or in the case of conforming lending, trail commission revenue and receivables are recognised at fair-value being the future trail commission receivable discounted to their net present value. Note 1. Summary of signiﬁ cant accounting policies cont. Equity settled compensation Share based compensation beneﬁ ts are provided to employees via the FSA Group Ltd Employee Share Option Plan (“ESOP”). Information relating to the ESOP is set out in the Remuneration Report, contained within the Directors’ report. The fair value of options granted under the ESOP is recognised as an employee beneﬁ t expense with a corresponding increase in equity. The fair value is measured at grant date and recognised over the period during which the employees become unconditionally entitled to the options. The fair value at grant date is independently determined using a Black-Scholes option pricing model that takes into account the exercise price, the term of the option, the impact of dilution, the share price at grant date and expected price volatility of the underlying share, the expected dividend yield and the risk free interest rate for the term of the option. The fair value of the options granted is adjusted to reﬂ ect market vesting conditions, but excludes the impact of any non-market vesting conditions (for example, proﬁ tability and sales growth targets). Non-market vesting conditions are included in assumptions about the number of options that are expected to become exercisable. At each reporting date, the Group revises its estimate of the number of options that are expected to become exercisable. The employee beneﬁ t expense recognised each period takes into account the most recent estimate. Upon the exercise of options, the balance of the share- based payments reserve relating to those options is transferred to share capital and the proceeds received, net of any directly attributable transaction costs, are credited to share capital. Under the employee share scheme, shares issued to employees for no cash consideration vest immediately on grant date. On this date, the market value of the shares issued is recognised as an employee beneﬁ ts expense with a corresponding increase in equity. Bonuses and proﬁ t sharing arrangements A provision is recognised for the amount expected to be paid under short term cash bonus or proﬁ t-sharing plans if the Group has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation can be estimated reliably. FSA GROUP LIMITED ANNUAL REPORT 2011 41 Notes to the Financial Statements cont. for the year ended 30 June 2011 Note 1. Summary of signiﬁ cant accounting policies cont. (j) Revenue recognition cont. Interest Interest income is recognised in the Statement of Comprehensive Income using the effective interest method. The effective interest method is the method of calculating the amortised cost of a ﬁ nancial asset or ﬁ nancial liability and allocating the interest income or expense over the relevant period. The effective interest rate is the rate that exactly discounts the estimated future cash receipts or payments over the expected life of the ﬁ nancial instrument to the net carrying amount of the ﬁ nancial asset or ﬁ nancial liability (which includes, where applicable, the unamortised balance of transaction costs). Finance fee income Finance fee income is recognised in either of two ways, either upfront where the fee represents a recovery of costs or a charge for services provided to customers (e.g. application fees and risk assessment fees) or, where income relates to loan origination, income is deferred and amortised over the effective life of the loan using the effective interest method. Deferred establishment fees are establishment fees which the borrower is contracted to pay but payment is deferred until such time as they repay the outstanding loan balance. These fees are waived if the loan is repaid after the qualifying period. These fees are recognised over the current average life of the loan. (m) Investments in subsidiaries Investments are brought to account on the cost basis in the Parent Entity’s ﬁ nancial statements and using the acquisition method, after initially being recognised at cost in the Consolidated Entity’s ﬁ nancial statements. The carrying amount of investments is reviewed annually by Directors to ensure it is not in excess of the recoverable amount of these investments. The recoverable amount is assessed from the shares’ current market value or the underlying net assets in the particular entities. The expected net cash ﬂ ow from investments has not been discounted to their present value in determining the recoverable amounts, except where stated. (n) Intangibles Goodwill on consolidation is initially recorded at the amount by which the purchase price for a business or for an ownership interest in a controlled entity exceeds the fair value attributed to its net assets at date of acquisition. Goodwill on acquisition of subsidiaries is included in intangible assets. Goodwill on acquisition of associates is included in investments in associates. Goodwill is tested annually for impairment and carried at cost less accumulated impairment losses. Gains and losses on the disposal of a subsidiary include the carrying amount of goodwill relating to the subsidiary sold. Software is measured on the cost basis less accumulated amortisation and accumulated impairment losses. Software is amortised over its useful life of 2 years. (k) Goods & Services Tax (GST) (o) Trade and other payables Revenue, expenses and assets are recognised net of the amount of GST, except where the amount of GST incurred is not recoverable from the Australian Taxation Ofﬁ ce. Where not recoverable, GST is recognised as part of the acquisition of the asset or as part of the expense. Receivables and payables in the Statement of Financial Position are shown inclusive of GST. Cash ﬂ ows are presented in the Statement of Cash Flows on a gross basis, except for the GST component of ﬁ nancing and investing activities, which are disclosed as operating cash ﬂ ows. (l) Comparative ﬁ gures Where required by Australian Accounting Standards, comparative ﬁ gures have been adjusted to conform to changes in presentation for the current ﬁ nancial year. Trade payables and other amounts are carried at amortised cost which is the fair value of the consideration to be paid in the future for goods and services received, whether or not billed to the Group. Monies received (and not yet distributed pursuant to the debt agreements under the pre 1 July 2007 regime) on behalf of institutional creditors are recorded as current liabilities. (p) Signiﬁ cant accounting estimates and assumptions The carrying amounts of certain assets and liabilities are often determined based on estimates and assumptions about future events. The key estimates and assumptions that have a signiﬁ cant risk of causing a material adjustment to the carrying amounts of certain assets and liabilities in the next annual reporting period are: 42 FSA GROUP LIMITED ANNUAL REPORT 2011 Notes to the Financial Statements cont. for the year ended 30 June 2011 Note 1. Summary of signiﬁ cant accounting policies cont. Impairment of goodwill The Group determines whether goodwill is impaired at least on an annual basis. This requires an estimation of the recoverable amount of the cash generating units to which the goodwill is allocated (refer to Note 15 in the ﬁ nancial statements). Impairment of receivables Debt agreement receivables Impairment of debt agreement receivables is assessed on a collective basis based on historical collections data. Considering the length of time it takes to collect debts in administration and the inherent uncertainty over the collection of these amounts this method represents management’s best estimate of the recoverability of debtors in the debt agreement business. Impairment is provided for and recorded in a separate Allowance account. Amounts are written off against this account as bad when there is no practical likelihood of recovery (e.g. when debt agreements are terminated by creditors). The evaluation process is subject to a series of estimates and judgments. The frequency of default, loss history, and current economic conditions are considered. Changes in these estimates could have a direct impact on the level of provision determined (refer to Note 8 in the ﬁ nancial statements). Other loans and advances For other loans and advances individually assessed provisions are raised where there is objective evidence of impairment and full recovery of the principal is considered doubtful. Provisions are established after considering the estimates of the fair value of the collateral taken and recorded in a separate Allowance account. Amounts are written off against the account as bad after management establishes amounts which will not be recovered from available evidence. (q) Associates Associates are those entities in which the Group has signiﬁ cant inﬂ uence, but not control, over the ﬁ nancial and operating policies. Associates are accounted for using the equity method (equity accounted investees). The consolidated ﬁ nancial statements include the Group’s share of the income and expenses of the equity accounted investees, after adjustments to align the accounting policies with those of the Group, from that date the signiﬁ cant inﬂ uence commences until the date where signiﬁ cant inﬂ uence ceases. When the Group’s share of the loss extends its interest in the equity accounted investee, the carrying amount of that interest (including any long term investments) is reduced to nil and the recognition of further losses is discontinued except to the extent that the Group has an obligation or has made payments on behalf of the investee. (r) Finance income and costs Finance income is measured and recognised as per (j) Revenue recognition above. Finance costs comprise interest expense on borrowings, unwinding of discount on provisions, dividends on preference shares classiﬁ ed as liabilities, foreign currency losses, changes in fair value of ﬁ nancial assets at fair value through proﬁ t or loss, impairment losses recognised on ﬁ nancial assets and losses on hedging instruments that are recognised in proﬁ t or loss. All ﬁ nance costs are recognised in proﬁ t or loss using the effective interest method. (s) Earnings per share The Group presents basic and diluted earnings per share (EPS) data for its ordinary shares. Basic EPS is calculated by dividing the proﬁ t or loss attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding during the year. Diluted EPS is determined by adjusting proﬁ t or loss attributable to the ordinary shareholders and the weighted average number of ordinary shares outstanding for the effects of all dilutive potential ordinary shares. (t) Operating segments An operating segment is a component of an entity that engages in business activities from which it may earn revenue and incur expenses (including revenues and expenses relating to transactions with other components of the same entity); whose operating results are regularly reviewed by the entity’s chief operating decision maker to make decisions about resources to be allocated to the segment and assess its performance; and for which discrete ﬁ nancial information is available. Operating segments are distinguished and presented based on the differences in providing services and providing ﬁ nance products. (u) Financial guarantee contracts Financial guarantee contracts are recognised as a ﬁ nancial liability at the time the guarantee is issued. The liability is initially measured at fair value and subsequently at the higher of the amount determined in accordance with AASB 137 Provisions, Contingent Liabilities and Contingent Assets and the amount initially recognised less cumulative amortisation, where appropriate. FSA GROUP LIMITED ANNUAL REPORT 2011 43 Notes to the Financial Statements cont. for the year ended 30 June 2011 Note 1. Summary of signiﬁ cant accounting policies cont. (v) Removal of parent entity ﬁ nancial statements The Group has applied amendments to the Corporations Act (2001) that remove the requirement for the Group to lodge parent entity ﬁ nancial statements. Parent entity ﬁ nancial statements have been replaced by the speciﬁ c parent entity disclosures in Note 30. (w) New standards and interpretations issued not yet effective or adopted Certain new accounting standards, amendments to standards and interpretations have been published that are not mandatory for the 30 June 2011 reporting period. The Consolidated Entity’s assessment of the impact of these new standards, amendments to standards and interpretations in the period of initial application is set out below. (i) AASB 2009-12 Amendments to Australian Accounting Standards These amendments are applicable to annual reporting periods beginning on or after 1 January 2011. These amendments make numerous editorial amendments to a range of Australian Accounting Standards and Interpretations, which have no major impact on the requirements of the amended pronouncements. The main amendment is to AASB 8 ‘Operating Segments’ and requires an entity to exercise judgement in assessing whether a government and entities known to be under the control of that government are considered a single customer for the purposes of certain operating segment disclosures. The adoption of these amendments from 1 July 2011 will not have a material impact on the Consolidated Entity. (ii) AASB 9 Financial Instruments, 2009-11 Amendments to Australian Accounting Standards arising from AASB 9 and 2010-7 Amendments to Australian Accounting Standards arising from AASB 9 This standard and its consequential amendments are applicable to annual reporting periods beginning on or after 1 January 2013 and completes phase I of the IASB’s project to replace IAS 39 (being the international equivalent to AASB 139 ‘Financial Instruments: Recognition and Measurement’). This standard introduces new classiﬁ cation and measurement models for ﬁ nancial assets, using a single approach to determine whether a ﬁ nancial asset is measured at amortised cost or fair value. To be classiﬁ ed and measured at amortised cost, assets must satisfy the business model test for managing the ﬁ nancial assets and have certain contractual cash ﬂ ow characteristics. All other ﬁ nancial instrument assets are to be classiﬁ ed and measured at fair value. This standard allows an irrevocable election on initial recognition to present gains and losses on equity instruments (that are not held-for- trading) in other comprehensive income, with dividends as a return on these investments being recognised in proﬁ t or loss. In addition, those equity instruments measured at fair value through other comprehensive income would no longer have to apply any impairment requirements nor would there be any ‘recycling’ of gains or losses through proﬁ t or loss on disposal. The accounting for ﬁ nancial liabilities continues to be classiﬁ ed and measured in accordance with AASB 139, with one exception, being that the portion of a change of fair value relating to the entity’s own credit risk is to be presented in other comprehensive income unless it would create an accounting mismatch. The Consolidated Entity will adopt this standard from 1 July 2013 but the impact of its adoption is yet to be assessed by the Consolidated Entity. (iii) AASB 2010-4 Further Amendments to Australian Accounting Standards arising from the Annual Improvements Project These amendments are applicable to annual reporting periods beginning on or after 1 January 2011. These amendments are a consequence of the annual improvements project and make numerous non-urgent but necessary amendments to a range of Australian Accounting Standards and Interpretations. The amendments provide clariﬁ cation of disclosures in AASB 7 ‘Financial Instruments: Disclosures’, in particular emphasis of the interaction between quantitative and qualitative disclosures and the nature and extent of risks associated with ﬁ nancial instrument; clariﬁ es that an entity can present an analysis of other comprehensive income for each component of equity, either in the statement of changes in equity or in the notes in accordance with AASB 101 ‘Presentation of Financial Instruments’; and provides guidance on the disclosure of signiﬁ cant events and transactions in AASB 134 ‘Interim Financial Reporting’. The adoption of these amendments from 1 July 2011 will not have a material impact on the Consolidated Entity. (iv) AASB 2010-5 Amendments to Australian Accounting Standards These amendments are applicable to annual reporting periods beginning on or after 1 January 2011. These amendments makes numerous editorial amendments to a range of Australian Accounting Standards and Interpretations, including amendments to reﬂ ect changes made to the text of International Financial Reporting Standards by the International Accounting Standards Board. The adoption of these amendments from 1 July 2011 will not have a material impact on the Consolidated Entity. 44 FSA GROUP LIMITED ANNUAL REPORT 2011 Notes to the Financial Statements cont. for the year ended 30 June 2011 Note 1. Summary of signiﬁ cant accounting policies cont. (x) New, revised or amending Standards and Interpretations The Consolidated Entity has adopted all of the new, revised or amending Standards and Interpretations issued by the Australian Accounting Standards Board that are relevant in the current period. Any signiﬁ cant impact on the accounting policies of the Consolidated Entity on adoption of these accounting standards and interpretations is disclosed in the relevant accounting policy. The adoption of these standards did not have any impact on the ﬁ nancial performance or position of the Consolidated Entity. The following standards and interpretations are most relevant to the Consolidated Entity: (i) AASB 2 Share-based Payment Transactions – amendments for Group Cash-settled Share-based Payment Transactions The Consolidated Entity has applied the amendments to AASB 2 from 1 July 2010. The amendments clariﬁ ed the scope of AASB 2 by requiring an entity that receives goods or services in a share-based payment arrangement to account for those goods or services no matter which entity in the Consolidated Entity settles the transaction, and no matter whether the transaction is settled in shares or cash. (ii) Interpretation 19 Extinguishing Financial Liabilities with Equity Instruments The Consolidated Entity has applied Interpretation 19 from 1 July 2010. The interpretation clariﬁ ed that equity instruments issued to a creditor to extinguish a ﬁ nancial liability qualiﬁ es as consideration paid. The equity instruments issued are measured at their fair value, or if not reliably measured, at the fair value of the liability extinguished, with any gain or loss recognised in proﬁ t or loss. (iii) AASB 2009-5 Amendments to Australian Accounting Standards arising from the Annual Improvements Project The Consolidated Entity has applied AASB 2009-5 amendments from 1 July 2010. The amendments result in some accounting changes for presentation, recognition or measurement purposes, while some amendments that relate to terminology and editorial changes had no or minimal effect on accounting. The main changes were: AASB 101 ‘Presentation of Financial Statements’ – classiﬁ cation is not affected by the terms of a liability that could be settled by the issuance of equity instruments at the option of the counterparty; AASB 107 ‘Statement of Cash Flows’ – only expenditure that results in a recognised asset can be classiﬁ ed as a cash ﬂ ow from investing activities; AASB 117 ‘Leases’ – removal of speciﬁ c guidance on classifying land as a lease; AASB 118 ‘Revenue’ – provides additional guidance to determine whether an entity is acting as a principal or agent; and AASB 136 ‘Impairment of Assets’ – clariﬁ es that the largest unit permitted for allocating goodwill, acquired in a business combination, is the operating segment as deﬁ ned in AASB 8 ‘Operating Segments’ before aggregation for reporting purposes. (iv) AASB 2009-10 Amendments to AASB 132 – Classiﬁ cation of Rights Issues The Consolidated Entity has applied AASB 2009-10 from 1 July 2010. The amendments clariﬁ ed that rights, options or warrants to acquire a ﬁ xed number of an entity’s own equity instruments for a ﬁ xed amount in any currency are equity instruments if the entity offers the rights, options or warrants pro-rata to all existing owners of the same class of its own non-derivative equity instruments. The amendment therefore provides relief to entities that issue rights in a currency other than their functional currency from treating the rights as derivatives with fair value changes recorded in proﬁ t or loss. (v) AASB 2010-3 Amendments to Australian Accounting Standards arising from the Annual Improvements Project The Consolidated Entity has applied AASB 2010-3 amendments from 1 July 2010. The amendments result in some accounting changes for presentation, recognition or measurement purposes, while some amendments that relate to terminology and editorial changes had no or minimal effect on accounting. The main changes were: AASB 127 ‘Consolidated and Separate Financial Statements’ and AASB 3 Business Combinations – clariﬁ es that contingent consideration from a business combination that occurred before the effective date of revised AASB 3 is not restated; the scope of the measurement choices of non-controlling interest is limited to when the rights acquired include entitlement to a proportionate share of net assets in the event of liquidation; requires an entity in a business combination to account for the replacement of acquiree’s share-based payment transactions, unreplaced and voluntarily replaced, by splitting between consideration and post combination expenses. FSA GROUP LIMITED ANNUAL REPORT 2011 45 Notes to the Financial Statements cont. for the year ended 30 June 2011 Note 2. Revenue and other income net of ﬁ nance expense Fees from services – Personal insolvency – Reﬁ nance broking and mortgage management – Corporate – Other services Total revenue Finance Income – Interest income – bridging ﬁ nance – Interest income – mortgage ﬁ nance assets – Upfront fee income – bridging ﬁ nance – Upfront fee income – mortgage ﬁ nance assets – Factoring income – Other interest income Finance Expense – Interest expense – Warehouse facilities – Interest expense – other lending facilities Net Finance income Other gains/(losses) Gain/(loss) on option valuation – fair value through proﬁ t or loss Gain/(loss) on disposal of plant and equipment Consolidated Entity 2011 $ 2010 $ 36,054,935 33,331,572 1,224,284 1,978,488 2,962,017 2,927,259 183,952 236,283 40,425,188 38,473,602 133,009 232,696 23,274,307 16,644,392 – 158,883 1,393,637 1,930,346 4,757,959 2,794,919 575,533 489,018 30,134,445 22,250,254 (14,948,891) (9,950,609) (1,171,274) (898,368) (16,120,165) (10,848,977) 14,014,280 11,401,277 (297,630) 898,050 (2,334) 7,437 (299,964) 905,487 46 FSA GROUP LIMITED ANNUAL REPORT 2011 Notes to the Financial Statements cont. for the year ended 30 June 2011 Note 3. Proﬁ t for the year Expenses Expenses from continuing activities excluding ﬁ nance costs, classiﬁ ed by function: Marketing expenses Administrative expenses Operating expenses Proﬁ t for the year from continuing operations has been arrived at after charging (crediting): Depreciation on plant and equipment Depreciation on investment properties Amortisation of software Impairment in value – goodwill Impairment in value – trade receivables Reversal of impairment in value – trade receivables (a) Net impairment Rental expense on operating lease – minimum lease payment Employee and contractor expenses Share-based payments expense Legal consulting – client services (a) change in estimates previously reported Consolidated Entity 2011 $ 2010 $ 5,440,401 6,546,096 9,754,301 9,919,351 23,640,317 21,465,325 38,835,019 37,930,772 303,914 11,504 132,218 447,636 – 459,053 8,635 302,134 769,822 49,263 7,660,760 8,729,201 (1,276,365) (1,469,504) 6,384,395 7,259,697 974,947 1,210,894 18,242,573 15,641,548 81,457 1,066,327 52,804 705,920 As stated in Note 1(p) the impairment of trade receivables is based on a method which evaluates the frequency of default, loss history, and current economic conditions. During the period, management received updated information on the loss history and recoverability percentages of debt agreement administration fees over their collection periods. Accordingly management has revised its best-estimate based on assumptions consistent with the updated information. This has resulted in the reduction in the provision for impairment in trade receivables previously recognised of $1,260,943. Note 4. Income Tax (a) Income tax expense Current tax expense Deferred tax expense (Over)/under provision in a prior period Deferred income tax expense included in income tax expense comprises: Decrease/(Increase) in deferred tax assets Increase in deferred tax liabilities 2,035,707 943,964 2,300,276 2,722,269 (23,108) 24,677 4,312,875 3,690,910 959,841 (582,134) 1,340,435 3,304,903 2,300,276 2,722,769 FSA GROUP LIMITED ANNUAL REPORT 2011 47 Notes to the Financial Statements cont. for the year ended 30 June 2011 Note 4. Income Tax cont. (b) Numerical reconciliation of income tax expense to prima facie tax payable Proﬁ t before income tax Tax at the Australian tax rate of 30% (2010: 30%) Tax effect of amounts which are not deductible/(taxable) in calculating taxable income Entertainment Non-assessable income Other Non-deductible employee costs (Over)/under provision in the prior year Income tax expense (c) Deferred tax assets Provisions Capital legal expenses Accrued expenditure Tax losses carried forward Other Deferred tax liability offset on tax consolidation Total deferred tax assets (d) Deferred tax liabilities Temporary difference on assessable income Deferred tax liability offset on tax consolidation Total deferred tax liabilities Note 5. Auditors’ Remuneration Amounts received or due and receivable by PKF (East Coast Practice): Audit and review of ﬁ nancial statements Other services – taxation Note 6. Earnings Per Share Consolidated Entity 2011 $ 2010 $ 15,328,466 12,868,122 4,598,540 3,860,437 8,876 17,810 (295,897) (242,716) – 24,464 14,861 15,841 4,335,983 3,666,233 (23,108) 24,677 4,312,875 3,690,910 826,711 1,439,782 32,113 55,974 381,425 197,004 156,461 130,931 453,714 272,180 1,493,227 2,453,068 (1,279,467) (2,412,280) 213,760 40,788 11,903,514 10,563,079 (1,279,467) (2,412,280) 10,624,047 8,150,799 191,000 59,460 250,460 191,750 55,897 247,647 (a) Reconciliation of earnings used to calculated basic and dilutive earnings per share Total Comprehensive income attributable to members of the parent for the year ($) 8,995,715 7,520,564 Basic earnings per share (cents) Diluted earnings per share (cents) 6.51 6.51 5.82 5.82 (b) Weighted average number of ordinary shares outstanding during the year Weighted average number of ordinary shares outstanding during the year used in calculating basic and dilutive EPS 138,253,785 129,141,305 48 FSA GROUP LIMITED ANNUAL REPORT 2011 Notes to the Financial Statements cont. for the year ended 30 June 2011 Note 7. Cash and Cash Equivalents Current Cash on hand and at bank Assets ﬁ nanced by Non-Recourse Financial Liabilities Cash on hand and at bank Note 8. Trade and Other Receivables Current Trade receivables Provision for impairment Sundry receivables Non-current Trade receivables Provision for impairment Ageing Analysis Consolidated Entity 2011 $ 2010 $ 9,413,356 7,394,759 7,394,118 6,605,211 16,807,474 13,999,970 42,587,174 40,324,302 (6,556,234) (7,867,793) 36,030,940 32,456,509 587,222 108,384 36,618,162 32,564,893 33,947,853 30,636,133 (6,090,921) (6,127,227) 27,856,932 24,508,906 Consolidated Entity 2011 2010 Gross $ Allowance $ Net $ Gross $ Allowance $ Net $ Trade and other Receivables Not past due Past due 0-30 Days Past due 31-60 Days Past due 61-90 Days Past 90 Days Total 67,782,961 (10,341,436) 57,441,525 61,011,953 (12,193,181) 48,818,772 3,276,620 (118,416) 3,158,204 2,901,117 (28,935) 2,872,182 904,773 74,510 (52,445) (35,454) 852,328 1,928,708 (32,196) 1,896,512 39,056 352,569 (33,609) 318,960 5,083,385 (2,099,404) 2,983,981 4,874,472 (1,707,099) 3,167,373 77,122,249 (12,647,155) 64,475,094 71,068,819 (13,995,020) 57,073,799 The movement in the provision for impairment Opening balance Provision for impairment recognised Unused provision reversed Bad debts Closing balance Consolidated Entity 2011 $ 2010 $ 13,995,020 10,360,428 6,002,213 7,919,422 (1,276,365) (1,469,504) (6,073,713) (2,815,326) 12,647,155 13,995,020 Some amounts have been written off as Bad debts during the year, as incurred and were not provided for. These are included in the Statement of Comprehensive Income. The provision for impairment recognised in this reconciliation will therefore not agree to the Impairment in value amount disclosed in Note 3. FSA GROUP LIMITED ANNUAL REPORT 2011 49 Notes to the Financial Statements cont. for the year ended 30 June 2011 Note 8. Trade and Other Receivables cont. Debt Agreement receivables Debt agreement receivables are receipted on a pro rata basis, in parity with other parties to the debt agreement. These debtors are assessed as being in arrears where they do not make their periodic payments as required by their debt agreements and where the terms of this payment have not been re-negotiated and approved by creditors to the debt agreement. This is monitored continuously by the Company’s internal collection department. Impairment of debt agreement receivables is assessed on a collective (portfolio) basis based on historical collections data. Considering the length of time it takes to collect debts in administration and the inherent uncertainty over the collection of these amounts this method represents management’s best estimate of the recoverability of debtors in the debt agreement business. Amounts are written off against this account, when the company has no realistic possibility of recovery. Bridging and factoring ﬁ nance receivables The Company does not currently offer bridging ﬁ nance products and is only active in pursuing recovery of this portfolio. Factoring ﬁ nance receivables are generally on 14 to 60 day terms. Impairment of bridging ﬁ nance receivables and factoring ﬁ nance receivables is assessed primarily by the equity in their underlying mortgage security (collateral), any ﬁ xed and ﬂ oating charges over the borrower’s business assets, assigned receivables in the case of factoring ﬁ nance operations, credit quality of the debtor, payment history and any other information available. Factoring ﬁ nance receivables are credit insured up to 90c in every dollar of approved receivables. These debtors are assessed as being in arrears where they do not make their payment obligations as required by their ﬁ nance contracts and where the terms of this payment have not been re-negotiated. This is monitored monthly by management. At reporting date there are certain bridging ﬁ nance receivables that were past due and are not impaired. Management has reviewed these receivables, their underlying mortgage security (collateral) and other information available, and have considered these to be recoverable. Of the $5,083,385 of receivables which are past 90 days in arrears, $947,826 represents bridging ﬁ nance receivables which have underlying collateral and security as mentioned above and are not impaired. Other trade and sundry receivables Other trade and sundry receivables are generally on 14 to 30 day terms. Impairment of other trade and sundry receivables is assessed on an individual basis with regard to the credit quality of the debtor, payment history and any other information available. These debtors are assessed as being in arrears where they do not pay on their invoice terms and where the terms of this payment have not been re-negotiated. This is monitored monthly by management. At reporting date there are certain other trade and sundry receivables that were past due and are not impaired. Management has reviewed these receivables, their payment history and other information available, and have considered these to be recoverable. 50 FSA GROUP LIMITED ANNUAL REPORT 2011 Notes to the Financial Statements cont. for the year ended 30 June 2011 Note 9. Other Assets Current Prepayments Other Note 10. Other Financial Assets Investments – fair value though proﬁ t or loss Movements during year (Investments) Beginning of the year Additions Impairment in value Note 11. Mortgage Finance Assets Non-securitised mortgage assets Provision for impairment Maturity Analysis Amounts to be received in less than 1 year Amounts to be received in greater than 1 year Impairment Consolidated Entity 2011 $ 2010 $ 887,138 242,122 3,952 3,575 891,090 245,697 600,420 898,050 898,050 – – 898,050 (297,630) – 600,420 898,050 229,428,987 200,654,826 (464,223) (220,205) 228,964,764 200,434,621 2,629,888 2,199,038 226,799,099 198,455,788 229,428,987 200,654,826 An impairment loss is recognised if the total expected recoveries in regard to an individual loan do not exceed the mortgage balance. In the event that actual or expected sales proceeds do not exceed the mortgage loan balance, this difference and any realisation costs would equal the impairment loss. Total recoveries include expected or actual net sales proceeds resulting from enforced sale of property security. Impairment has been assessed on an individual basis with primary regard to the underlying equity in mortgage security (collateral) for each of the loans receivable and also with regard to the credit quality of the debtor, payment history and any other information available. A mortgage loan is classiﬁ ed as being in arrears at the reporting date on the basis of “past due” amounts. Any loan with an amount that is past due (either instalment arrears or total arrears comprising of any instalments arrears plus any other charges) is classiﬁ ed as being in arrears and the total amount of the loan is recorded as in arrears. Ageing of arrears is determined by dividing total arrears over instalment amount and multiplying this by the instalment frequency (i.e. weekly, fortnightly, and monthly). At reporting date, the Group had registered mortgages over real property (comprising of residential land and buildings) for each of the mortgage loan receivables. The weighted average loan to valuation ratio (at the fair values of the underlying real property securities) at reporting date was 67.53% (2010: 67.39%). The valuations of the underlying property securities have been performed at the later of the original loan application or subsequent loan variation date and do not take into account any other realisation costs. FSA GROUP LIMITED ANNUAL REPORT 2011 51 Notes to the Financial Statements cont. for the year ended 30 June 2011 Note 11. Mortgage Finance Assets cont. Ageing Analysis Consolidated Entity 2011 2010 Gross $ Allowance $ Net $ Gross $ Allowance $ Net $ 200,163,987 20,181,949 3,083,280 1,664,891 – 200,163,987 172,434,715 – 172,434,715 – – – 20,181,949 18,242,207 3,083,280 2,586,980 1,664,891 2,057,086 – – – 18,242,207 2,586,980 2,057,086 4,334,880 (464,223) 3,870,657 5,333,838 (220,205) 5,113,633 229,428,987 (464,223) 228,964,764 200,654,826 (220,205) 200,434,621 Not past due Past due 0-30 Days Past due 31-60 Days Past due 61-90 Days Past 90 Days Total The movement in the provision for impairment Consolidated Entity 2011 $ 220,205 644,236 2010 $ 175,331 400,932 (400,218) (356,058) 464,223 220,205 Country of Incorporation Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Percentage of equity interest held by the Consolidated Entity 2011 % 100 100 100 100 100 90 100 65 75 70 2010 % 100 100 100 100 100 90 100 65 75 70 Opening balance Provision for impairment recognised Bad debts Closing balance Note 12. Controlled Entities Name Prospex Proﬁ le Pty Ltd (2) FSA Australia Pty Ltd (2) Fox Symes Financial Pty Ltd (1) Fox Symes & Associates Pty Ltd (1) Fox Symes Debt Relief Services Pty Ltd (1) Fox Symes Home Loans Pty Ltd (2) 180 Group Holdings Pty Ltd (2) Aravanis Insolvency Pty Ltd (1) Fox Symes Business Services Pty Ltd (1) 180 Group Pty Ltd (3) (1) Investment held by FSA Australia Pty Ltd (2) Investment held by FSA Group Ltd (3) Investment held by 180 Group Holdings Pty Ltd 52 FSA GROUP LIMITED ANNUAL REPORT 2011 Notes to the Financial Statements cont. for the year ended 30 June 2011 Note 12. Controlled Entities cont. The following entities are subsidiaries of 180 Group Pty Ltd Name Country of Incorporation 180 Capital Finance Pty Ltd 180 Corporate Pty Ltd 180 Property Holdings Pty Ltd 180 Equity Partners Pty Ltd 180 Capital Funding Pty Ltd One Financial Pty Ltd Australia Australia Australia Australia Australia Australia The following entities are subsidiaries of Fox Symes Home Loans Pty Ltd Name Country of Incorporation Fox Symes Home Loans (Services) Pty Ltd Fox Symes Home Loans (Management) Pty Ltd Fox Symes Home Loans (Mortgage Management) Pty Ltd Fox Symes Home Loans (Special Services) Pty Ltd Fox Symes Home Loans Warehouse Trust No.1 Australia Australia Australia Australia Australia Ultimate Parent Entity FSA Group Ltd is the Ultimate Parent Entity. Note 13. Plant and Equipment Computer equipment at cost Accumulated depreciation Net carrying amount Ofﬁ ce equipment at cost Accumulated depreciation Net carrying amount Furniture and ﬁ ttings at cost Accumulated depreciation Net carrying amount Motor vehicles at cost Accumulated depreciation Net carrying amount Total plant and equipment at cost Accumulated depreciation Net carrying amount Percentage of equity interest held by the Consolidated Entity 2011 % 100 100 100 100 100 100 2010 % 100 100 100 100 100 100 Percentage of equity interest held by the Consolidated Entity 2011 % 100 100 100 100 85 2010 % 100 100 – – 85 Consolidated Entity 2011 $ 2010 $ 1,820,410 1,718,175 (1,639,186) (1,446,325) 181,224 447,040 271,850 331,817 (302,684) (259,242) 144,356 266,044 72,575 246,350 (220,284) (184,812) 45,760 47,372 (13,709) 33,663 61,538 47,372 (3,332) 44,040 2,580,866 2,343,714 (2,175,863) (1,893,711) 405,003 450,003 FSA GROUP LIMITED ANNUAL REPORT 2011 53 Notes to the Financial Statements cont. for the year ended 30 June 2011 Note 13. Plant and Equipment cont. Movements Balance at 1 July 2009 Additions Disposals Depreciation Balance at 30 June 2010/1 July 2010 Additions Disposals Depreciation Computer Equipment $ Ofﬁ ce Equipment $ Furniture & Fittings $ Motor Vehicles $ 479,757 136,933 (497) 118,403 15,518 (1,840) 94,975 11,485 – (344,343) (59,506) (44,922) 271,850 115,819 72,575 120,111 61,538 25,318 (477) (374) (1,483) 26,173 43,878 (15,729) (10,282) 44,040 – – Total $ 719,308 207,814 (18,066) (459,053) 450,003 261,248 (2,334) (205,968) (47,956) (39,613) (10,377) (303,914) Balance at 30 June 2011 181,224 144,356 45,760 33,663 405,003 Note 14. Investment Property Investment property At cost Accumulated depreciation Movements during year: Beginning of the year Depreciation Consolidated Entity 2011 $ 2010 $ 362,339 (60,792) 301,547 362,339 (49,288) 313,051 313,051 321,686 (11,504) (8,635) 301,547 313,051 There is a ﬁ rst mortgage registered over the Investment Property (refer Note 17(a)), and is leased on a “month to month” basis. The fair value of the Investment Property at 30 June 2011 was $364,439 (independently valued at using current market data). 54 FSA GROUP LIMITED ANNUAL REPORT 2011 Notes to the Financial Statements cont. for the year ended 30 June 2011 Note 15. Intangible Assets Goodwill Recognised on consolidation Accumulated impairment Software at cost Accumulated amortisation Movements during year (Goodwill): Beginning of the year Impairment Reduction in value* Movements during year (Software): Beginning of the year Additions Amortisation Consolidated Entity 2011 $ 2010 $ 3,222,136 3,222,136 (49,263) (49,263) 3,172,873 3,172,873 929,630 708,768 (600,226) (468,008) 329,404 240,760 3,502,277 3,413,633 3,172,873 3,841,448 – – (49,263) (619,312) 3,172,873 3,172,873 240,760 220,862 263,500 279,394 (132,218) (302,134) 329,404 240,760 * (2010) Reduction in value relates to the redemption of 8 Convertible Redeemable Preference Shares (“CRPS”) which have been credited against Goodwill. On 1 February 2010, pursuant to the terms of the purchase agreement of 180 Group acquired on 21 April 2006, the remaining 8 CRPS were redeemed due to 180 Group not meeting its proﬁ t target for 30 June 2009. Included in the carrying amount of Goodwill is an amount of $2,827,749 which relates to the Goodwill acquired on acquisition of 180 Group Holdings Pty Ltd and its controlled entities, and $345,124 which relates to the original investment by the parent company in FSA Australia Pty Ltd and its controlled entities. The 180 Group represents a separate cash generating unit (CGU). Impairment The recoverable amount of goodwill attributable to the 180 Group CGU, is determined based on “value in use” calculations, by estimating the future cash inﬂ ows and outﬂ ows to be derived by the CGU and applying an appropriate discount rate to those future cashﬂ ows. The major key assumption relating to the forecast information is the continued growth of the factoring ﬁ nance division and the utilisation of its funding lines. The cashﬂ ows have been projected over a two year period using average historical earnings margins and then adjusted for non-cash items. The cashﬂ ows beyond the two year period are extrapolated using a constant growth rate of 3%, which does not exceed the long-term average growth rate for the industry. An average pre-tax discount rate of 18.5% has been applied to the net cashﬂ ows. Note 16. Trade and Other Payables Current Unsecured trade payables Factoring client payables Institutional creditors Sundry payables and accruals Consolidated Entity 2011 $ 2010 $ 1,234,243 965,940 359,161 2,396,313 1,558,767 3,212,578 7,367,174 6,175,720 10,519,345 12,750,551 FSA GROUP LIMITED ANNUAL REPORT 2011 55 Notes to the Financial Statements cont. for the year ended 30 June 2011 Note 17. Borrowings Current Unsecured Other loans Secured Mortgage Bank loan – other lending facilities Non-current Secured Mortgage Bank loan – other lending facilities Non-Recourse Financial Liabilities Secured Warehouse facilities (a) Total Current, Non-Current and Non-Recourse secured liabilities: Mortgage Bank loans – other lending facilities Warehouse facilities (b) The carrying amounts of Non-Current Assets pledged as security are: Fixed charge over assets Investment properties Loan and other assets in the Fox Symes Home Loans Warehouse Trust No. 1 Consolidated Entity 2011 $ 2010 $ 837,279 527,151 4,034 3,728 – 2,830,663 4,034 2,834,391 841,313 3,361,542 263,862 268,272 15,982,358 11,625,507 16,246,220 11,893,779 220,865,314 194,541,639 267,896 272,000 15,982,358 14,456,170 220,865,314 194,541,639 237,115,568 209,269,809 301,547 313,051 236,358,882 207,039,832 236,660,429 207,352,883 Bank loans – other lending facilities consist of two funding facilities: i) A full recourse lending facility to support bridging ﬁ nance operations, amounting to $1,624,974 (2010: $2,830,664) which is secured by a ﬂ oating charge over the remaining assets of the 180 Group Pty Ltd and controlled entities and the other wholly-owned subsidiaries of FSA Group Ltd. Excluded from this charge are cash assets held on behalf of institutional and other creditors to debt agreements administered by the Group. This facility expires on 31 December 2012; and ii) A limited recourse factoring ﬁ nance facility, amounting to $14,357,384 (2010: $11,625,506) where the funder may at its election, enforce a”ﬁ rst-loss” liability on factored receivables of 10% of the outstanding facility balance, up to a maximum of $2 million, unless there has been an event of default or breach of borrowing covenants. This facility expires on 31 July 2012. The Company has started to renegotiate and extend the current term of the facility. The Board believes this renegotiation will be completed prior to the current expiry date on similar terms. 56 FSA GROUP LIMITED ANNUAL REPORT 2011 Notes to the Financial Statements cont. for the year ended 30 June 2011 Note 17. Borrowings cont. (c) Warehouse facility Warehouse facilities are used to fund mortgages prior to securitisation and include revolving Senior and Mezzanine Note facilities. As at 30 June 2011, the drawdown limit under the Senior and Mezzanine Note facilities was $225 million and $10 million respectively and $208,428,000 and $9,080,000 respectively had been drawn down at reporting date. Subsequent to year end the drawdown limit under the Senior Note facility increased to $250 million. The Warehouse facilities are 2 year rolling facilities. As at 30 June 2011, the facility was due to expire on 15 October 2012. Subsequent to year end the term of the facility was extended until 15 October 2013. Interest is payable at the applicable BBSW rate plus a margin of 2% for the Senior Notes and a margin of 9% for the Mezzanine Notes. The interest rate at 30 June 2011 for the Senior and Mezzanine Notes was 6.90% and 13.90% respectively. The facilities are secured against current and future mortgage ﬁ nance assets (refer Note 11). All borrowing covenants were met during the year. Note 18. Provisions Current Employee beneﬁ ts Non-current Employee beneﬁ ts Provision for employee beneﬁ ts Consolidated Entity 2011 $ 2010 $ 812,435 588,535 343,055 251,012 A provision has been recognised for employee beneﬁ ts relating to annual leave and long service leave. The measurement and recognition criteria relating to employee beneﬁ ts have been included in Note 1 to this report. As at 30 June 2011, the Consolidated Entity employed 171 full-time equivalent employees (2010: 162) plus a further 5 independent contractors (2010: 5). Note 19. Share Capital 138,253,785 (2010: 138,253,785) Fully paid ordinary shares 11,692,255 11,692,255 (a) Ordinary shares Balance 1 July – 7 October 2009 – 6 November 2009 – 27 January 2010 – 1 February 2010 Balance 30 June 2011 2011 Number 2010 Number 138,253,785 115,437,513 – – – – 11,351,340 2,964,932 500,000 8,000,000 138,253,785 138,253,785 There were no movements in share capital during the year ended 30 June 2011. 2010 On 7 October 2009, a placement to Institutional and Sophisticated Investors for 11.35 million ordinary shares at 37 cents per share was undertaken. The shares were fully paid and have no par value. On 6 November 2009, a Share Purchase Plan to Shareholders at 37 cents per share was undertaken which issued 2,964,932 ordinary shares. The shares were fully paid and have no par value. On 27 January 2010, 500,000 ordinary shares were issued on exercise of 500,000 $0.25 options. On 1 February 2010, 8 convertible redeemable preference shares (“CRPS”) were converted pursuant to the terms of the purchase agreement of 180 Group, acquired on 21 April 2006, upon 180 Group meeting its cumulative proﬁ t target to 30 June 2008. The remaining 8 CRPS were redeemed at this time due to 180 Group not meeting its proﬁ t target for 30 June 2009. FSA GROUP LIMITED ANNUAL REPORT 2011 57 Notes to the Financial Statements cont. for the year ended 30 June 2011 Note 19. Share Capital cont. (b) Options On 2 July 2010, 1,050,000 options exercisable at $0.50 on or before 2 July 2013 were issued as part of executive remuneration. Note 20. Reserves Share based payments reserve The share based payments reserve records items recognised as expenses on valuation of employee share options. Note 21. Cash Flow Information Reconciliation of cash ﬂ ows from operations to proﬁ t after tax Proﬁ t after tax Non-cash ﬂ ows in proﬁ t/(loss): Depreciation Amortisation – intangibles Impairment – intangibles (Gain)/Loss on ﬁ nancial asset at FVTPL Loss on disposal of intangibles Gain on disposal of plant & equipment Changes in assets and liabilities: Increase in trade and other receivables (Increase)/decrease in other current assets (Decrease)/increase in trade and other payables Increase in employee entitlements Increase in other liabilities Cash ﬂ ows from operating activities Note 22. Commitments (i) Operating leases (non-cancellable): Minimum lease payments – not later than one year – later than one year and not later than ﬁ ve years Consolidated Entity 2011 $ 2010 $ 11,015,591 9,177,212 315,418 132,218 – 467,688 302,134 49,263 297,630 (898,050) 2,334 – (7,437) (9,027,173) (17,887,059) (645,390) 499,593 (984,800) 6,155,280 315,943 203,329 4,218,856 4,395,857 5,640,627 2,457,810 948,912 899,075 3,142,998 4,091,910 4,091,910 4,990,985 Operating leases relate to the lease of the Consolidated Entity’s business premises, and printing equipment rental. Note 23. Key Management Personnel Disclosures (a) Details of Directors and Key Management Personnel (i) Directors Sam Doumany Tim Odillo Maher Deborah Southon Stan Kalinko Sally Herman Hugh Parsons Non-Executive Chairman Executive Director Executive Director Non-Executive Director Non-Executive Director (appointed 24 January 2011) Non-Executive Director (resigned 31 May 2011) 58 FSA GROUP LIMITED ANNUAL REPORT 2011 Notes to the Financial Statements cont. for the year ended 30 June 2011 Note 23. Key Management Personnel Disclosures cont. (a) Details of Directors and Key Management Personnel cont. (ii) Key Management Personnel of the Consolidated Entity Don Mackenzie Anthony Carius Fred El Tahche Goran Turner David Camilleri Company Secretary (appointed 19 November 2010) Chief Financial Ofﬁ cer (resigned 1 July 2011)* Chief Information Ofﬁ cer Chief Executive – Fox Symes Home Loans Manager – Debt Agreements (b) Remuneration of Directors and Key Management Personnel Short-term employee beneﬁ ts Long-term employee beneﬁ ts Post-employment beneﬁ ts Termination beneﬁ ts Share-based payments Consolidated Entity 2011 $ 2010 $ 1,939,332 1,725,675 46,892 120,609 51,389 81,457 8,193 103,842 – 10,479 2,239,679 1,848,189 * Anthony Carius resigned as CFO with effect from 1 July 2011. He will remain with the Company until 31 August 2011 to ensure a smooth transition to the Company’s new CFO Ms Cellina Chen who has been the Company’s Financial Controller since December 2003. Fair value of options granted as part of remuneration are estimates only. The estimates are based on the use of the Black-Scholes option pricing model. This model takes account of factors such as the option exercise price, the current level and volatility of the underlying share price and the time to maturity of the options. Information about the remuneration of Directors and Key Management Personnel which is currently required under Section 300A of the Corporations Act and under Accounting Standard AASB 124 “Related Party Disclosures” is included in the Remuneration Report within the Directors’ Report on pages 18 to 22. (c) Options issued as part of remuneration for the year ended 30 June 2011 On 2 July 2010, 1,050,000 options exercisable at $0.50 on or before 2 July 2013 were issued as part of executive remuneration. (d) Shares issued on exercise of remuneration options There were no shares issued on the exercise of remuneration options during or since the end of the ﬁ nancial year. (e) Option holdings of Directors and Key Management Personnel Balance at 1 July 2010 remuneration Exercised Granted as Balance at Other 30 June 2011 Net Options Change Vested at 30 June 2011 Not Total Exercisable Exercisable ESOP Options Directors Key Management Personnel Anthony Carius Fred El Tahche Total ESOP Options n/a – – – 550,000 500,000 1,050,000 – – – – – – 550,000 125,000 500,000 100,000 1,050,000 225,000 – – – 125,000 100,000 225,000 FSA GROUP LIMITED ANNUAL REPORT 2011 59 Notes to the Financial Statements cont. for the year ended 30 June 2011 Note 23. Key Management Personnel Disclosures cont. (f) Shareholdings of Directors and Key Management Personnel Shares held in FSA Group Ltd Balance Granted as 1 July 2010 Remuneration Options Exercised Net Change Balance Other 30 June 2011 Directors Sam Doumany Tim Odillo Maher Deborah Southon Stan Kalinko Sally Herman Key Management Personnel Anthony Carius David Camilleri Total 1,040,541 48,809,231 12,960,047 15,406 – 66,699 77,000 62,968,924 – – – – – – – – – – – – – – – – – 1,040,541 (6,000,000) 42,809,231 – – – 1,500 – 12,960,047 15,406 – 68,199 77,000 (5,998,500) 56,970,424 (g) Loans to Directors and Key Management Personnel There were no loans to Directors or Key Management Personnel during the year. (h) Other transactions to Directors and Key Management Personnel Other transactions with Directors and Key Management Personnel and related parties During the year, the Consolidated Entity provided factoring ﬁ nance to Skin Patrol Pty Ltd, a company which is associated with Mr Tim Odillo Maher. The total of all factoring fees received was $42,296 for the year ended 30 June 2011 (2010: $24,036). The ﬁ nance facility and factoring fees charged were provided on normal commercial terms. During the year the Consolidated Entity purchased supplies from the Ethan Group Pty Ltd, a company which is associated with Mr Tim Odillo Maher. The total amount purchased was $39,079 (2010: $20,276). The supplies were purchased on normal commercial terms. Note 24. Events Occurring After Reporting date There have been no events since the end of the ﬁ nancial year that impact upon the ﬁ nancial statements as at 30 June 2011 except as follows: (cid:129) On 4 July 2011, the Company obtained a three year non-recourse $50m note facility from Bendigo and Adelaide Bank (cid:129) On 25 August 2011, the Company signed an extension of its existing non-recourse note facility, increasing its $235m facility limit to $260m for a further term with the facility now expiring on 15 October 2013 (cid:129) On 30 August 2011, Directors declared a maiden one cent fully franked dividend to shareholders to be paid on 30 September 2011 with a record date of 13 September 2011. Note 25. Related Party Disclosures (a) Key management personnel Disclosures relating to key management personnel are set out in Note 23. (b) Subsidiaries Interests in subsidiaries are set out in Note 12. (c) Transactions with related parties Transactions with related parties of Directors or Key Management Personnel are as disclosed in Note 23 (h). (d) Outstanding related party balances arising from sales/purchase of goods or services Current factoring receivables – other related parties 60 FSA GROUP LIMITED ANNUAL REPORT 2011 Consolidated Entity 2011 $ 2010 $ 31,775 81,361 Notes to the Financial Statements cont. for the year ended 30 June 2011 Note 26. Segment Information Operating Segments Services Home Loans Small Business Other/ Unallocated Consolidated Total 2011 $ 2010 $ 2011 $ 2010 $ 2011 $ 2010 $ 2011 $ 2010 $ 2011 $ 2010 $ Revenue and Income External sales Finance Income Finance expense 36,054,936 33,331,572 1,224,284 1,978,488 2,962,017 2,927,259 183,951 236,283 40,425,188 38,473,602 89,665 94,928 25,023,810 18,838,593 4,974,092 3,228,220 46,878 88,513 30,134,445 22,250,254 (8,841) (2,817) (14,959,134) (10,055,162) (1,129,694) (768,874) (22,496) (22,124) (16,120,165) (10,848,977) Net Finance Income 80,824 92,111 10,064,676 8,783,431 3,844,398 2,459,346 24,382 66,389 14,014,280 11,401,277 Other gains/(losses) (2,334) – Internal sales and income 569,664 331,462 – – – – – – – – (297,630) 898,050 – – – – – – – 7,437 (299,964) 905,487 – – 569,664 331,462 (569,664) (331,462) 36,703,090 33,755,145 11,288,960 10,761,919 6,508,785 6,284,655 208,333 310,109 54,139,504 50,780,366 Eliminations Total Revenue and Income Results Segment proﬁ t before tax 10,585,117 7,417,209 4,249,885 4,600,204 624,704 865,005 (131,240) (14,296) 15,328,466 12,868,122 Income tax (expense)/beneﬁ t (3,180,044) (2,230,618) (1,000,299) (1,167,632) (191,958) (263,518) 59,426 (29,142) (4,312,875) (3,690,910) Proﬁ t for the year 7,405,073 5,186,591 3,249,586 3,432,572 432,746 601,487 (71,814) (43,438) 11,015,591 9,177,212 Items included in Proﬁ t for the year Share of the proﬁ ts of an associate using the Equity Accounting Method Depreciation and amortisation Impairment in value – Goodwill Impairment in value – trade receivables Reversal of impairment in value – trade receivables Employee and contractor expenses – – – – – – 23,981 18,528 23,981 18,528 394,935 717,090 33,193 30,894 7,791 12,835 11,717 9,003 447,636 769,822 – – – – – – – 49,263 – 49,263 5,754,532 6,426,423 701,364 400,932 1,201,888 1,892,662 2,976 9,184 7,660,760 8,729,201 (1,276,365) (1,469,504) – – – – – – (1,276,365) (1,469,504) 12,709,766 11,033,124 3,085,528 2,790,532 2,312,585 1,681,716 134,694 136,176 18,242,573 15,641,548 Share based payments expense – – – – – – 81,457 52,804 81,457 52,804 Legal and consultancy 25,274 93,381 662,093 351,857 369,960 260,083 9,000 599 1,066,327 705,920 Rental expense on operating lease – minimum lease payment 941,876 1,210,894 – – 33,071 – – – 974,947 1,210,894 Segment assets 78,340,498 63,487,167 247,786,529 219,538,543 23,595,862 22,884,380 17,972,825 15,938,868 367,695,714 321,848,958 Eliminations Total assets Included in Segment assets (51,470,310) (44,932,158) 316,225,404 276,916,800 Investment in associate – – – – – – 63,975 47,188 63,975 47,188 Segment liabilities 51,439,660 41,308,856 230,415,580 204,430,854 20,280,841 20,002,106 2,405,026 1,524,206 304,541,107 267,266,022 Eliminations Total liabilities (42,880,166) (35,098,712) 261,660,941 232,167,310 FSA GROUP LIMITED ANNUAL REPORT 2011 61 Notes to the Financial Statements cont. for the year ended 30 June 2011 Note 26. Segment Information cont. Information about operating segments Identiﬁ cation of reportable segments The Consolidated Entity’s Chief Operating Decision Maker has identiﬁ ed three reportable segments based on the differences in providing services and providing ﬁ nance products. These three segments are subject to different regulatory environments and legislation. The three identiﬁ ed reportable segments are: Services; Home Loans; and Small Business. Services include debt agreement proposal preparation and administration, trustee services and other related services. Home Loans includes the provision of mortgage ﬁ nance, home loan broking and mortgage management. Small Business includes corporate consultancy services and the provision of bridging ﬁ nance and factoring ﬁ nance. The Consolidated Entity operates in one geographic region – Australia. Measurement Each identiﬁ ed reportable segment accounts for transactions consistently with the Accounting policies mentioned in Note 1 to these ﬁ nancial statements. Inter-segment transactions are highlighted as eliminated to reconcile to the proﬁ t, total assets and liabilities amounts of the Consolidated Entity. Centrally incurred costs for shared services are allocated between segments based employee numbers as a percentage of the total head count. Restatement of segment information In the prior ﬁ nancial report the following were identiﬁ ed as reportable segments: Services; Home Loan Lending; and Business Services and Lending. Services include debt agreement proposal preparation and administration, home loan broking, trustee services and other related services. Home Loan Lending includes the provision of mortgage ﬁ nance. Business Services and Lending includes corporate consultancy services and the provision of bridging ﬁ nance and factoring ﬁ nance. During the period, the Consolidated Entity’s Chief Operating Decision Maker has decided that the Home Loan Lending segment be expanded to include home loan broking (previously included in the “Services” segment). Given the anticipated increasing contribution to proﬁ t of home loan broking with its new mortgage management business, the Consolidated Entity’s Chief Operating Decision Maker now analyses these results with those of Home Loan Lending under the umbrella of “Home Loans” related products and services. As such these are now combined to form the “Home Loans” segment. The “Business Services and Lending” segment has been renamed “Small Business” but contains all the same ﬁ nancial segment information as it did in the prior period. If the previous segmentation methodology had been used to report for the year ended 30 June 2010, the information would have been presented as follows: 62 FSA GROUP LIMITED ANNUAL REPORT 2011 Notes to the Financial Statements cont. for the year ended 30 June 2011 Note 26. Segment Information cont. Services Home Loan Lending Business Services and Lending Other/ Unallocated Consolidated Total 2011 $ 2010 $ 2011 $ 2010 $ 2011 $ 2010 $ 2011 $ 2010 $ 2011 $ 2010 $ 37,235,348 35,310,060 43,871 – 2,962,017 2,927,259 183,952 236,283 40,425,188 38,473,602 91,723 96,936 25,021,752 18,836,585 4,974,092 3,228,220 46,878 88,513 30,134,445 22,250,254 (8,840) (2,817) (14,959,135) (10,055,162) (1,129,694) (768,874) (22,496) (22,124) (16,120,165) (10,848,977) 82,883 94,119 10,062,617 8,781,423 3,844,398 2,459,346 24,382 66,389 14,014,280 11,401,277 Revenue and Income External sales Finance Income Finance expense Net Finance Income Other gains/(losses) (2,334) – – – (297,630) 898,050 Internal sales and income 2,281,736 2,083,968 20,455 192,799 – – Eliminations – – 7,437 (299,964) 905,487 – 2,302,191 2,276,767 (2,302,191) (2,276,767) Total Revenue and Income 39,597,633 37,488,147 10,126,943 8,974,222 6,508,785 6,284,655 208,334 310,109 54,139,504 50,780,366 Results Segment proﬁ t before tax 11,363,890 8,585,062 3,471,112 3,432,350 624,704 865,005 (131,240) (14,295) 15,328,466 12,868,122 Income tax (expense)/beneﬁ t (3,413,676) (2,583,557) (766,667) (814,693) (191,958) (263,518) 59,426 (29,142) (4,312,875) (3,690,910) Proﬁ t for the year 7,950,214 6,001,505 2,704,445 2,617,657 432,746 601,487 (71,814) (43,437) 11,015,591 9,177,212 Items included in Proﬁ t for the year Share of the proﬁ ts of an associate using the Equity Accounting Method Depreciation and amortisation Impairment in value – Goodwill Impairment in value – trade receivables Reversal of impairment in value – trade receivables Employee and contractor expenses Share based payments expense – – – – – – 23,981 18,528 23,981 18,528 394,935 717,090 33,193 30,894 7,791 12,835 11,717 9,003 447,636 769,822 – – – – – – – 49,263 – 49,263 5,824,914 6,426,423 630,983 400,932 1,201,888 1,892,662 2,975 9,184 7,660,760 8,729,201 (1,276,365) (1,469,504) – – – – – – (1,276,365) (1,469,504) 14,445,314 12,940,696 1,349,980 882,960 2,312,585 1,681,716 134,694 136,176 18,242,573 15,641,548 – – – – – – 81,457 52,804 81,457 52,804 Legal and consultancy 25,866 93,381 661,501 351,857 369,960 260,083 9,000 599 1,066,327 705,920 Rental expense on operating lease – minimum lease payment 941,876 1,210,894 – – 33,071 – – – 974,947 1,210,894 Segment assets 81,731,018 66,599,281 236,847,768 207,459,549 23,595,862 22,884,380 17,972,827 15,938,870 360,147,475 312,882,080 Eliminations Total assets Included in Segment assets (43,922,071) (35,965,280) 316,225,404 276,916,800 Investment in associate – – – – – – 63,975 47,188 63,975 47,188 Segment liabilities 42,943,818 34,743,152 229,699,778 202,029,679 20,280,841 20,002,106 2,230,886 1,524,207 295,155,323 258,299,144 Eliminations Total liabilities (33,494,382) (26,131,834) 261,660,941 232,167,310 FSA GROUP LIMITED ANNUAL REPORT 2011 63 Notes to the Financial Statements cont. for the year ended 30 June 2011 Note 27. Financial Instruments Financial and Capital Risk Management The Group undertakes transactions in a range of ﬁ nancial instruments including: (cid:129) Cash and cash equivalents (cid:129) Trade and other receivables (cid:129) Mortgage ﬁ nance assets (mortgage receivables) (cid:129) Other ﬁ nancial assets (cid:129) Payables (including Institutional creditor liabilities) (cid:129) Interest bearing liabilities including note facility funding, bank loans and mortgage loans. These ﬁ nancial instruments represented in the Statement of Financial Position are categorised under AASB 139 Financial Instruments: Recognition and Measurement as follows: Financial Assets Cash and cash equivalents Financial assets at fair value through proﬁ t or loss Loans and receivables at amortised cost Financial Liabilities Payables at amortised cost Consolidated Entity 2011 $ 2010 $ 16,807,474 13,999,970 600,420 898,050 293,439,858 257,508,420 249,881,404 223,176,964 The Consolidated Entity has exposure to the following risks from these ﬁ nancial instruments: (cid:129) credit risk (cid:129) liquidity risk (cid:129) market (interest) risk The Board of Directors has overall responsibility for the establishment and oversight of the risk management framework through the work of the Audit & Risk Management Committee. The Audit & Risk Management Committee is responsible for developing and monitoring risk management policies. The Chairman of the Audit & Risk Management Committee reports to the Board of Directors on its activities. Risk management procedures are established by the Audit & Risk Management Committee and carried out by management to identify and analyse the risks faced by the Consolidated Entity and to set controls and monitor risks. These are discussed individually below. Capital Management The Consolidated Entity’s objectives in managing its capital is the safeguard of the Consolidated Entity’s ability to continue as a going concern, maintain the support of its Investors and other business partners, support the future growth initiatives of the Consolidated Entity and maintain an optimal capital structure to reduce the costs of capital. These objectives are reviewed periodically by the Board. The Consolidated Entity assesses the adequacy of its capital requirements, cost of capital and gearing (i.e. debt/equity mix) in line with these objectives. Gearing is used to monitor levels of debt capital used by the Consolidated Entity to fund its operations. The ratio is calculated as Net Interest Bearing Liabilities divided by Tangible Assets (less Cash Assets). The gearing ratio at 30 June 2011, excluding the Consolidated Entity’s special purpose entity Fox Symes Home Loans Warehouse Trust #1 whose liabilities are non-recourse to the Consolidated Entity, was 25.6% (2010: 25.8%). 64 FSA GROUP LIMITED ANNUAL REPORT 2011 Notes to the Financial Statements cont. for the year ended 30 June 2011 Note 27. Financial Instruments cont. It was the policy of the Consolidated Entity during the 2011 ﬁ nancial year to maintain a gearing ratio, excluding the Consolidated Entity’s special purpose entity Fox Symes Home Loans Warehouse Trust #1 of less than 50% (2010: 50%) The Consolidated Entity deﬁ nes capital as total equity reported in the Statement of Financial Position. Fair values of ﬁ nancial instruments The carrying values of the Consolidated Entity’s ﬁ nancial assets and liabilities approximate their fair values. Fair value measurements recognised in the Statements of Financial Position The Consolidated Entity has only one ﬁ nancial asset measured at fair value through proﬁ t or loss, being an option to acquire shares in an unlisted proprietary company. The value has been determined by independent external experts using inputs which have been derived from observable market data. The fair value of this option as at 30 June 2011 was $600,420 (2010: $898,050). This represents a “tier 2” fair value measurement as per AASB 7 Financial Instruments. Credit Risk Credit risk is the risk of ﬁ nancial loss to the Consolidated Entity if a customer or counterparty to a ﬁ nancial instrument fails to meet its contractual obligations. The Consolidated Entity does not have any material credit risk exposure to any single debtor or group of debtors under ﬁ nancial instruments entered into by the Consolidated Entity. Credit risk is concentrated in two categories of ﬁ nancial instruments: (cid:129) Trade and other receivables, including bridging ﬁ nance receivables and factoring ﬁ nance receivables; and (cid:129) Mortgage ﬁ nance assets (mortgage receivables). Credit and lending policies have been established for all lending operations whereby each new borrower is analysed individually for creditworthiness and serviceability prior to the Consolidated Entity doing business with them. This includes where applicable credit history checks and affordability assessment and, in the case of lending activities, conﬁ rming the existence and title of the property security, and assessing the value of the security provided. These are monitored by the Audit & Risk Management Committee though the management of the Consolidated Entity. Mortgage ﬁ nance assets are secured by ﬁ rst mortgage security over real property. Bridging ﬁ nance and factoring ﬁ nance receivables are secured by ﬁ rst or second mortgage security, and where applicable, ﬁ xed and ﬂ oating charges over business assets. The Consolidated Entity retains the mortgages over the secured real property (consisting of land and buildings) until the loans are repaid. The Consolidated Entity is entitled to take possession of and enforce the sale of the secured real property in the event that the borrower defaults under the terms of their mortgage. Personal insolvency (debt agreement and personal insolvency agreements under the Bankruptcy Act) receivables are unsecured, though debtors are assessed for serviceability and affordability prior to inception of each agreement. The above minimises the Consolidated Entity’s credit risk exposure to acceptable levels. The Audit & Risk Management Committee also establishes the Consolidated Entity’s allowance for impairment policy which is discussed in Notes 8 and 11. Liquidity Risk Liquidity risk is the risk that Consolidated Entity will not be able to meet its ﬁ nancial obligations as they fall due. The Consolidated Entity’s approach in managing liquidity is to ensure that it will always have sufﬁ cient liquidity to meet its liabilities when due without incurring unacceptable losses or risking damage to the Consolidated Entity’s reputation. The Consolidated Entity’s liquidity risk management policies include cashﬂ ow forecasting, which is reviewed and monitored monthly by management as part of the Consolidated Entity’s master budget and having access to funding through credit facilities. The contractual maturity of the Consolidated Entity’s ﬁ xed and ﬂ oating rate ﬁ nancial liabilities are as follows. The amounts represent the future undiscounted principal and interest cashﬂ ows. FSA GROUP LIMITED ANNUAL REPORT 2011 65 Notes to the Financial Statements cont. for the year ended 30 June 2011 Note 27. Financial Instruments cont. Consolidated Entity 30 June 2011 Carrying Contractual Cashﬂ ows amount $ $ 6 months or less $ 6-12 months $ 1 to 2 years $ 2 to 5 years $ 5-25 years $ Trade and other payables 1,593,404 1,593,404 1,593,404 Institutional creditors 1,558,767 1,558,767 1,558,767 Other payables 7,367,174 7,367,174 7,367,174 Other short term loans 837,279 837,279 837,279 – – – – – – – – 15,982,358 17,228,521 577,510 568,095 16,082,916 – – – – – – – – – – 267,896 607,697 13,405 13,405 26,810 82,664 471,413 Bank loans Mortgage loans Warehouse facilities 220,865,314 237,724,412 7,880,974 7,752,480 222,090,958 – – Consolidated Entity 30 June 2010 Carrying Contractual Cashﬂ ows amount $ $ 6 months or less $ 6-12 months $ 1 to 2 years $ 2 to 5 years $ 5-25 years $ Trade and other payables 3,362,253 3,362,253 3,362,253 Institutional creditors 3,212,578 3,212,578 3,212,578 Other payables 6,175,720 6,175,720 6,175,720 Other short term loans 527,151 527,151 527,151 – – – – – – – – – – – – – – – – – – Bank loans Mortgage loans 14,456,170 16,267,646 3,377,166 405,045 12,485,435 272,000 608,062 13,029 13,029 26,059 78,179 477,766 Warehouse facilities 194,541,639 203,783,550 5,988,595 5,890,955 191,904,000 – – FSA Group Ltd has a secured note facility comprising of senior and mezzanine debt through a special purpose entity, the Fox Symes Home Loans Warehouse Trust No.1. As at 30 June 2011, the facility has a combined drawdown limit of $235,000,000. This facility is secured against the book of loan assets created by the trust. As at 30 June 2011 the Consolidated Entity had withdrawn $217,508,000 from this facility. It had unused credit at the end of the year of $17,492,000. The term and limit of this facility was increased post year end. Please refer to Note 24 “Events occuring after reporting date”. FSA Group Ltd’s subsidiary 180 Group Pty Ltd has two secured loan facilities supporting its lending activities. The bridging ﬁ nance and factoring ﬁ nance facilities have drawdown limits of $2,500,000 and $25,000,000 respectively. As at 30 June 2011, the Company had withdrawn $1,650,000 from the bridging ﬁ nance facility and it had unused credit at the end of the year of $850,000 on this facility. As at 30 June 2011, the Company had withdrawn $14,362,215 from the factoring ﬁ nance facility and it had unused credit at the end of the year of $10,637,785 on this facility. Warehouse facilities The Consolidated Entity is reliant on the renewal of existing warehouse facilities, the negotiation of new warehouse facilities, or the issuance of residential mortgage backed securities. Each warehouse facility is structured so that if it is not renewed or otherwise defaults there is only limited recourse to the Consolidated Entity. If a warehouse facility is not renewed or otherwise defaults and its assets are liquidated, the primary impact to the Consolidated Entity would be the loss of future income streams from excess spread, being the difference between our mortgage rate and the cost of funds, fee income and the write off of any unamortised balance of deferred transaction costs. The Directors are satisﬁ ed that any sale of mortgages in repayment of warehouse facilities or an event of default in relation to the Consolidated Entity’s warehouse facilities will not affect the Consolidated Entity’s ability to continue as a going concern. 66 FSA GROUP LIMITED ANNUAL REPORT 2011 Notes to the Financial Statements cont. for the year ended 30 June 2011 Note 27. Financial Instruments cont. Market risk Market risk is the risk that changes in market prices will affect the Consolidated Entity’s income or the value of holdings in its ﬁ nancial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising the return. Market risk of the Consolidated Entity is concentrated in interest rate risk. Mortgage ﬁ nance assets are lent on variable interest rates and are ﬁ nanced by variable rate borrowings, which mitigate the Consolidated Entity’s exposure to interest rate risk on these borrowings to an acceptable level. These borrowings are provided to the Consolidated Entity on a two year rolling facility and are non-recourse to the Consolidated Entity unless there is material event of default or breach of borrowing covenants. Bridging ﬁ nance assets and factoring ﬁ nance assets are provided to borrowers on ﬁ xed and variable rate terms. These are ﬁ nanced by variable rate borrowings. The returns on the products are sufﬁ cient to mitigate adverse interest rate movements on the borrowings. As such the risk does not warrant the cost of purchasing derivative ﬁ nancial instruments to mitigate this risk completely. The Board and Management are satisﬁ ed that this policy is appropriate for the Consolidated Entity at this time. These assets are ﬁ nanced by long term debt facilities. All other sources of ﬁ nance are immaterial to the Consolidated Entity in amount and exposure. Interest rate sensitivity analysis The tables below show the effect on ﬁ nance costs and proﬁ t after tax if interest rates had been 50 basis points (bps) higher or lower at reporting date on the Consolidated Entity’s ﬂ oating rate ﬁ nancial instruments (2010:25 bps). A 50 bps sensitivity is considered reasonable given the current level of both short-term and long-term Australian interest rates. This would represent approximately two rate increases/decreases. In the current economic environment, where uncertainty remains about a second serious worldwide economic recession, it is the Company’s view that it is unlikely there will be a sharp upwards movement in the interest rate cycle over the next 12 months. The analysis is based on interest rate risk exposures at reporting date on both ﬁ nancial assets and liabilities. If interest rates increased by 50bps (2010: 25bps) If interest rates decreased by 50bps (2010: 25bps) Note 28. Investments in Associates Equity accounted investments in associates Purchase consideration Inter-entity loan Share of associates retained earnings Consolidated Entity Proﬁ t after tax 2011 $ 28,928 (28,928) 2010 $ 8,778 (8,778) 7,963 7,963 (366,322) (366,322) 422,334 63,975 405,547 47,188 The Consolidated Entity has one investment in an associate which it accounts for using the equity accounting method. The associate, Huntingdale Smythe Lawyers Pty Ltd is a company incorporated in Australia and provides legal services. The Consolidated Entity has 50% ownership and 50% of the voting power in the entity. FSA GROUP LIMITED ANNUAL REPORT 2011 67 Notes to the Financial Statements cont. for the year ended 30 June 2011 Note 28. Investments in Associates cont. Information about the Associate is as follows: Consolidated Entity’s share of: Revenue Proﬁ t before tax Income tax expense Proﬁ t for the year Net assets 2011 $ 34,990 23,981 (7,194) 16,787 2010 $ 107,811 18,528 (5,558) 12,970 122,951 106,164 Note 29. Contingent Liabilities There were no contingent liabilities relating to the Group at reporting date except the following: 2011 Mortgage loans At reporting date loan applications that had been accepted by the Group but not yet settled amount to $1,809,500. Mortgages are usually settled within 4 weeks of acceptance. Bank Guarantees The Company has obtained a bank guarantee for it business premises as at 30 June 2011 amounting to $685,278. 2010 Mortgage loans At reporting date loan applications that had been accepted by the Group but not yet settled amount to $9,537,900. Mortgages are usually settled within 4 weeks of acceptance. Note 30. Parent Entity Information The accounting policies of the parent entity, which have been applied in determining the ﬁ nancial information shown below, are the same as those applied in the consolidated ﬁ nancial statements. Refer to Note 3 for a summary of the signiﬁ cant accounting policies relating to the Group. Financial position Total Current Assets Total Non-Current Assets Total Assets Total Current Liabilities Total Liabilities Net Assets Equity Share capital Reserves Accumulated losses Total Equity 2011 $ 2010 $ 3,314,319 1,784,184 10,426,990 10,426,990 13,741,309 12,211,174 2,265,452 2,265,452 745,186 745,186 11,475,857 11,465,988 11,692,255 11,692,255 745,831 664,374 (962,229) (890,641) 11,475,857 11,465,988 68 FSA GROUP LIMITED ANNUAL REPORT 2011 Notes to the Financial Statements cont. for the year ended 30 June 2011 Note 30. Parent Entity Information cont. Financial performance Proﬁ t/(loss)after income tax Other Comprehensive Income Total Comprehensive income/(loss)for the year 2011 $ (71,588) – (71,588) 2010 $ 6,278 – 6,278 Guarantees entered into by the parent entity relation to the debts of its subsidiaries FSA Group Limited has entered into a deed of cross guarantee with two of its wholly owned subsidiaries, FSA Australia Pty Limited and Fox Symes Debt Relief Services Pty Limited. Refer to Note 31 for further details. There are no contingent liabilities or commitments in the parent entity. Note 31. Deed of Cross Guarantee The following entities are party to a deed of cross guarantee under which each company guarantees the debts of the others: FSA Group Limited FSA Australia Pty Limited Fox Symes Debt Relief Services Pty Limited By entering into the deed, the wholly-owned entities have been relieved from the requirement to prepare a ﬁ nancial report and directors’ report under Class Order 98/1418 (as amended) issued by the Australian Securities and Investments Commission (‘ASIC’). The above companies represent a ‘Closed Group’ for the purposes of the Class Order, and as there are no other parties to the Deed of Cross Guarantee that are controlled by FSA Group Limited, they also represent the ‘Extended Closed Group’. Set out below is a consolidated statement of comprehensive income and statement of ﬁ nancial position of the ‘Closed Group’. Statement of Comprehensive Income Revenue and other income Fees from services Finance income Finance expense Net ﬁ nance income Total revenue and other income net of ﬁ nance expense Expenses from continuing activities Proﬁ t/(loss) before income tax Income tax (expense)/beneﬁ t Proﬁ t after income tax Other Comprehensive Income Share of Other Comprehensive income of Associates Total Comprehensive income for the year 2011 $ 2010 $ 23,696,281 23,012,747 668,299 398,375 (26,783) (6,056) 641,516 392,319 24,337,797 23,405,066 (3,533,706) (3,812,464) 20,804,091 19,592,602 (6,058,509) (5,827,390) 14,745,582 13,765,212 – – – – 14,745,582 13,765,212 FSA GROUP LIMITED ANNUAL REPORT 2011 69 Notes to the Financial Statements cont. for the year ended 30 June 2011 Note 31. Deed of Cross Guarantee cont. Statement of Financial Position Current Assets Cash and cash equivalents Trade and other receivables Current tax assets Other assets Total Current Assets Non-Current Assets Trade and other receivables Investments Total Non-Current Assets Total Assets Current Liabilities Trade and other payables Total Current Liabilities Non-Current Liabilities Deferred tax liabilities Total Non-Current Liabilities Total Liabilities Net Assets Equity Share capital Reserves Retained earnings Total Equity 2011 $ 2010 $ 4,751,906 4,938,247 13,212,307 10,439,295 290,703 13,905 112,756 8,998 18,268,821 15,499,296 25,793,101 21,898,540 77,265,279 67,752,080 103,058,380 89,650,620 121,327,201 105,149,916 6,193,781 6,559,488 6,193,781 6,559,488 10,401,612 8,685,659 10,401,612 8,685,659 16,595,393 15,245,147 104,731,808 89,904,769 11,692,256 11,692,256 745,831 664,374 92,293,721 77,548,139 104,731,808 89,904,769 70 FSA GROUP LIMITED ANNUAL REPORT 2011 Directors’ Declaration The Directors of FSA Group Ltd declare that: (a) in the Directors’ opinion the ﬁ nancial statements and notes, set out on pages 15 to 70, and the Remuneration report in the Directors’ report, set out on pages 18 to 22 are in accordance with the Corporations Act 2001, including: (i) giving a true and fair view of the Company’s and the Consolidated Entity’s ﬁ nancial position as at 30 June 2011 and of their performance, for the ﬁ nancial year ended on that date; and (ii) complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and Corporations Regulations 2001. (b) the ﬁ nancial statements also comply with International Financial Reporting Standards as disclosed in Note 1; (c) there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable; and (d) at the date of this declaration, there are reasonable grounds to believe that the members of the Extended Closed Group will be able to meet any obligations or liabilities to which they are, or may become, subject by virtue of the deed of cross guarantee described in Note 31 to the ﬁ nancial statements. The Directors have been given the declarations for the ﬁ nancial year ended 30 June 2011, required by Section 295A of the Corporations Act 2001. Signed in accordance with a resolution of the Directors Tim Odillo Maher Director Sydney 30 August 2011 FSA GROUP LIMITED ANNUAL REPORT 2011 71 Independent Auditor’s Report To the members of FSA Group Ltd INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF FSA GROUP LIMITED Report on the Financial Report We have audited the accompanying financial report of FSA Group Limited, which comprises the statement of financial position as at 30 June 2011, the statement of comprehensive income, the statement of changes in equity and the statement of cash flows for the year then ended, notes comprising a summary of significant accounting policies, other explanatory information, and the directors’ declaration of FSA Group Limited ("the company") and the consolidated entity. The consolidated entity comprises the company and the entities it controlled at the year’s end or from time to time during the financial year. Directors’ Responsibility for the Financial Report The directors of the company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the financial report that is free from material misstatement, whether due to fraud or error. In Note 1, the directors also state, in accordance with Accounting Standard AASB 101 Presentation of Financial Statements, that the financial statements comply with International Financial Reporting Standards. Auditor’s Responsibility Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in accordance with Australian Auditing Standards. Those standards require that we comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance about whether the financial report is free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial report, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial report in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Tel: 61 2 9251 4100 | Fax: 61 2 9240 9821 | www.pkf.com.au PKF | ABN 83 236 985 726 Level 10, 1 Margaret Street | Sydney | New South Wales 2000 | Australia DX 10173 | Sydney Stock Exchange | New South Wales The PKF East Coast Practice is a member of the PKF International Limited network of legally independent member firms. The PKF East Coast Practice is also a member of the PKF Australia Limited national network of legally independent firms each trading as PKF. PKF East Coast Practice has offices in NSW, Victoria and Brisbane. PKF East Coast Practice does not accept responsibility or liability for the actions or inactions on the part of any other individual member firm or firms. Liability limited by a scheme approved under Professional Standards Legislation. 72 FSA GROUP LIMITED ANNUAL REPORT 2011 Independent Auditor’s Report cont. To the members of FSA Group Ltd Independence In conducting our audit, we have complied with the independence requirements of the Corporations Act 2001. Opinion In our opinion: (a) the financial report of the consolidated entity is in accordance with the Corporations Act 2001, including: (i) (ii) giving a true and fair view of the consolidated entity’s financial position as at 30 June 2011 and of its performance for the year ended on that date; and complying with Australian Accounting Standards and the Corporations Regulations 2001; and (b) the financial report complies with International Financial Reporting Standards as disclosed in Note 1. Report on the Remuneration Report We have audited the Remuneration Report included in pages 18 to 22 of the directors’ report for the year ended 30 June 2011. The directors of the company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards. Opinion In our opinion, the Remuneration Report of FSA Group Limited for the year ended 30 June 2011 complies with section 300A of the Corporations Act 2001. PKF Arthur Milner Partner 30 August 2011 Sydney FSA GROUP LIMITED ANNUAL REPORT 2011 73 Shareholder Information for the year ended 30 June 2011 Additional information required by the Australian Securities Exchange Ltd and not shown elsewhere in this report is as follows. The information is current as at 17 August 2011. (a) Distribution of equity securities The number of holders, by size of holding, in each class of security are: 1 – 1,000 1,001 – 5,000 5,001 – 10,000 10,001 – 100,000 100,001 and over Total Quoted Ordinary shares Number of holders Number of shares 118 267 211 362 124 1,082 19,400 859,549 1,855,639 13,551,026 121,968,171 138,253,785 The number of shareholders holding less than a marketable parcel of shares (1,852) are 161 (holding a total of 59,613 ordinary shares). Unquoted $0.50 options exercisable on or before 2 July 2013 Number of holders Number of options 1 – 1,000 1,001 – 5,000 5,001 – 10,000 10,001 – 100,000 100,001 and over Total – – – – 2 2 (b) Twenty largest holders The names of the twenty largest holders, in each class of quoted security are (ordinary shares): 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Capital Management Corporation Mazamand Group Pty Ltd ADST Pty Ltd BJR Investment Holding Pty Ltd Investment Custodial Services Ltd ABN AMRO Clearing Sydney Ms Danita Rae Lowes Ruminator Pty Ltd Berne Nominees No 132 Pty Ltd Atkone Pty Ltd Harness Capital Pty Ltd Toga Enterprises Pty Ltd J P Morgan Nominees Australia Sareena Enterprises Pty Ltd Contemplator Pty Ltd Mr Costa Emil Vrisakis and Mrs Despina Vrisakis Bulwarra Holdings Pty Ltd Mr Peter Carr Maramindi Pty Ltd James Dundas Ritchie Top 20 Total 26,000,000 16,809,231 12,960,047 11,000,000 3,693,566 2,574,376 2,541,953 2,385,174 2,274,193 2,256,506 2,155,000 1,604,431 1,400,000 1,356,667 1,285,223 1,256,000 1,113,150 1,058,505 1,040,541 1,000,000 74 FSA GROUP LIMITED ANNUAL REPORT 2011 95,764,563 138,253,785 69.27% 100.00% – – – – 1,050,000 1,050,000 18.81% 12.16% 9.37% 7.96% 2.67% 1.86% 1.84% 1.73% 1.64% 1.63% 1.56% 1.16% 1.01% 0.98% 0.93% 0.91% 0.81% 0.77% 0.75% 0.72% Shareholder Information cont. for the year ended 30 June 2011 (c) Substantial shareholders The names of substantial shareholders who have notiﬁ ed the Company in accordance with section 671B of the Corporations Act 2001 are: Number of shares Mazamand Group Pty Ltd ADST Pty Ltd BJR Investment Holdings Pty Ltd (d) Voting rights All ordinary shares carry one vote per share without restriction. (e) Restricted securities 16,809,231 12,960,047 11,000,000 As at the date of this report there were no ordinary shares subject to voluntary restriction agreements. (f) Business objectives The entity has used its cash and assets that are readily convertible to cash in a way consistent with its business objectives. FSA GROUP LIMITED ANNUAL REPORT 2011 75 Corporate Information Directors Sam Doumany – Non-Executive Chairman Tim Odillo Maher – Executive Director Deborah Southon – Executive Director Stan Kalinko – Non-Executive Director Sally Herman – Non-Executive Directoror Company Secretary Don Mackenzie Registered Ofﬁ ce and Corporate Ofﬁ ce Level 3 70 Phillip Street Sydney NSW 2000 Phone: +61 (02) 8985 5565 Fax: +61 (02) 8985 5290 Solicitors Hopgood Ganim Level 8, Waterfront Place 1 Eagle Street Brisbane QLD 4000 Share Register Link Market Services Ltd Locked Bag A14 Sydney South, NSW 1235 Phone: +61 (02) 8280 7454 Auditors PKF Level 10 1 Margaret Street Sydney New South Wales 2000 Country of Incorporation Australia Securities Exchange Listing Australian Securities Exchange Ltd ASX Code: FSA Internet Address www.fsagroup.com.au Australian Business Number ABN 98 093 855 791 76 FSA GROUP LIMITED ANNUAL REPORT 2011 DESIGN: COLLIER & ASSOCIATES THE STRATEGIC DESIGN COMPANY #15903 This report was printed on Neo Satin which is FSC (COC) Mixed Sources accredited. All ﬁ bre used in the production of NEO is purchased from sources approved by FSC, PEFC or CSA and operating under the framework of ISO1400 environmental standards. www.fsagroup.com.au

Continue reading text version or see original annual report in PDF format above